<PAGE> 1
EXHIBIT (a)(1)(a)
R&B FALCON CORPORATION
OFFER TO PURCHASE FOR CASH ANY AND ALL OUTSTANDING SHARES OF ITS
13 7/8% SENIOR CUMULATIVE REDEEMABLE PREFERRED STOCK
AT $1,300.00 NET PER SHARE
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THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON WEDNESDAY, NOVEMBER 29, 2000, UNLESS THE OFFER IS EXTENDED.
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R&B Falcon Corporation, a Delaware corporation (the "Company"), is offering
to purchase any and all outstanding shares of its 13 7/8% Senior Cumulative
Redeemable Preferred Stock, $0.01 par value per share (the "Shares"), at
$1,300.00 net per Share, net to the seller in cash, upon the terms and subject
to the conditions set forth herein and in the related Letter of Transmittal
(which together constitute the "Offer").
----------------------
OUR OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. OUR OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE "THE
OFFER -- 5. CERTAIN CONDITIONS OF THE OFFER."
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE OFFER, PASSED UPON THE FAIRNESS OR
MERITS OF THE OFFER OR PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
OUR BOARD OF DIRECTORS HAS APPROVED THE OFFER. HOWEVER, NEITHER R&B FALCON
CORPORATION NOR ANY OF ITS DIRECTORS OR EXECUTIVE OFFICERS MAKES ANY
RECOMMENDATION TO YOU AS TO WHETHER TO TENDER ALL OR ANY SHARES. YOU MUST MAKE
YOUR OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO
TENDER. SEE "SPECIAL FACTORS -- 2. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE
OFFER; PLANS OF THE COMPANY AFTER THE OFFER."
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The Shares are currently listed and traded on the New York Stock Exchange
under the symbol "FLC NA09." As of October 26, 2000, there were 356,961.014
Shares outstanding. We anticipate that on November 1, 2000, we will issue
12,382.085 additional Shares as a payment-in-kind of the dividend payment due on
that date. Therefore, we expect that the Offer will effectively be for a total
of 369,343.099 Shares.
You may obtain additional copies of this Offer to Purchase, the Letter of
Transmittal and other tender offer materials at our expense. You may direct
questions and requests for assistance to Georgeson Shareholder Communications
Inc., the information agent, at 800-223-2064.
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The Dealer Managers for this Offer are:
GOLDMAN, SACHS & CO. MORGAN STANLEY & CO. INCORPORATED
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The Date of this Offer to Purchase is October 27, 2000.
<PAGE> 2
IMPORTANT
IF YOU WISH TO TENDER ALL OR ANY PORTION OF YOUR SHARES, YOU SHOULD EITHER
(1) IF YOU HOLD THE SHARES IN BOOK-ENTRY FORM, TENDER THROUGH THE AUTOMATED
TENDER OFFER PROGRAM OF THE DEPOSITORY TRUST COMPANY ("DTC") AND COMPLY WITH THE
PROCEDURE FOR BOOK-ENTRY TRANSFER SET FORTH UNDER "BOOK-ENTRY TRANSFER" IN "THE
OFFER -- 2. PROCEDURE FOR TENDERING SHARES," OR (2) IF YOU HOLD PHYSICAL
CERTIFICATES EVIDENCING THE SHARES, COMPLETE AND SIGN THE LETTER OF TRANSMITTAL
OR A PHOTOCOPY THEREOF IN ACCORDANCE WITH THE INSTRUCTIONS IN THE LETTER OF
TRANSMITTAL, MAIL OR DELIVER IT AND ANY OTHER REQUIRED DOCUMENTS TO THE AMERICAN
STOCK TRANSFER & TRUST COMPANY (THE "DEPOSITARY"), AND EITHER MAIL OR DELIVER
THE CERTIFICATES FOR SUCH SHARES TO THE DEPOSITARY. IF YOU DESIRE TO TENDER
SHARES AND YOUR CERTIFICATES FOR SUCH SHARES CANNOT BE DELIVERED TO THE
DEPOSITARY OR YOU CANNOT COMPLY WITH THE PROCEDURE FOR BOOK-ENTRY TRANSFER IN A
TIMELY MANNER, YOU SHOULD TENDER YOUR SHARES BY FOLLOWING THE PROCEDURES FOR
GUARANTEED DELIVERY SET FORTH UNDER "GUARANTEED DELIVERY" IN "THE OFFER --
2. PROCEDURE FOR TENDERING SHARES." IF YOU ARE A BENEFICIAL OWNER WHO OWNS
SHARES REGISTERED IN THE NAME OF A BROKER, DEALER, BANK, TRUST COMPANY OR OTHER
NOMINEE, YOU SHOULD CONTACT SUCH BROKER, DEALER, BANK, TRUST COMPANY OR OTHER
NOMINEE IF YOU DESIRE TO TENDER YOUR SHARES.
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R&B FALCON HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF R&B FALCON AS TO WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING
YOUR SHARES PURSUANT TO THE OFFER. R&B FALCON HAS NOT AUTHORIZED ANY PERSON TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
OTHER THAN THOSE CONTAINED IN THIS DOCUMENT OR IN THE RELATED LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY R&B FALCON.
----------------------
FORWARD LOOKING STATEMENTS
Some of the statements contained in this Offer to Purchase under the
caption "Special Factors," and some of the statements included in the documents
that are incorporated herein by reference, are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. These statements:
- address activities, events or developments that the Company expects,
believes, anticipates or estimates will or may occur in the future,
including those related to the completion or the effects of the proposed
merger with Transocean Sedco Forex;
- are based on assumptions and analyses that the Company has made and that
it believes are reasonable under the circumstances when made; and
- are subject to many risks, uncertainties and other factors, many of which
are beyond the control of the Company.
The Company's actual results could differ materially from those anticipated
in the forward-looking statements as a result of the delay of the merger or its
failure to occur, market conditions, the response of stockholders to this Offer,
the completion of the Company's pending public offering and other risks,
uncertainties and other factors, some of which are described in the Company's
Form 10-K, preliminary proxy statement, and other SEC filings, which could
materially affect the Company's future results of operations. When considering
these forward-looking statements, you should keep in mind the risk factors and
other cautionary statements contained in this Offer to Purchase. The Company
will not update these statements unless the securities laws require it to do so.
<PAGE> 3
SUMMARY TERM SHEET
This summary highlights important information from this Offer to Purchase.
To understand the offer fully and for a more complete description of the terms
of the offer, you should carefully read this entire Offer to Purchase and Letter
of Transmittal. We have included references to the sections of the Offer to
Purchase where a more complete description of the topics in this summary are
discussed.
TRANSACTION SUMMARY
THE OFFER: R&B Falcon Corporation is offering to purchase any
and all of the 369,343.099 outstanding shares of
its 13 7/8% Senior Cumulative Redeemable Preferred
Stock having an aggregate liquidation preference of
$369,343,099, plus accrued and unpaid dividends.
This offer is not conditioned upon any minimum
number of shares being tendered.
CUSIP NOS.: 74912E309
74912E200
CONSIDERATION: A fixed price of $1,300 per share. The
consideration per share will not be increased for
accrued and unpaid dividends.
COMMENCEMENT DATE OF THE
OFFER: October 27, 2000.
EXPIRATION OF THE OFFER: November 29, 2000, at 5:00 p.m. New York City time.
DEALER MANAGERS: Goldman, Sachs & Co. and Morgan Stanley & Co.
Incorporated.
INFORMATION AGENT: Georgeson Shareholder Communications Inc.,
toll-free telephone 800-223-2064.
QUESTIONS AND ANSWERS CONCERNING THE OFFER
WHO IS OFFERING TO PURCHASE THE SHARES?
- R&B Falcon Corporation is offering to purchase your shares of R&B Falcon
13 7/8% Senior Cumulative Redeemable Preferred Stock. See "Introduction".
WHAT IS THE CLASS AND AMOUNT OF SHARES SOUGHT IN THE OFFER?
- We are offering to purchase any and all outstanding shares of our 13 7/8%
Senior Cumulative Redeemable Preferred Stock that are issued and outstanding
at any time during the offer, or any lesser number of shares that stockholders
properly tender in the offer. See "Introduction" and "Special Factors -- 2.
Purpose of the Offer; Certain Effects of the Offer; Plans of the Company After
the Offer."
- As of October 26, 2000, there were 356,961.014 shares of our 13 7/8% Senior
Cumulative Redeemable Preferred Stock outstanding. We anticipate that, on
November 1, 2000, we will issue 12,382.085 additional shares as a
payment-in-kind of the dividend payment due on that date. Therefore, we expect
that the offer will effectively be for a total of 369,343.099 shares.
- Because the offer includes all shares that are issued and outstanding at any
time during the offer, the offer includes an offer to purchase the shares that
will be issued as a dividend on
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November 1, 2000. Any tender of shares prior to November 1, 2000 will not
include the shares issued as a dividend on that date. If you want to tender all
of your shares, you may either:
1. tender all of your shares before November 1, 2000 in accordance with the
procedures described in this Offer to Purchase, and then tender the shares
issued on November 1, 2000 by complying with those procedures a second
time, or
2. tender your shares after November 1, 2000.
WHAT IS THE PURPOSE OF THE OFFER?
- The purpose of the offer is to enable us to eliminate or reduce the number of
outstanding shares of our 13 7/8% Senior Cumulative Redeemable Preferred
Stock, which will improve our capital structure and increase our financial
flexibility. See "Special Factors -- 2. Purpose of the Offer; Certain Effects
of the Offer; Plans of the Company After the Offer."
HOW MUCH AND WHEN WILL R&B FALCON PAY FOR THE TENDERED SHARES AND IN WHAT FORM
OF PAYMENT? WILL HOLDERS BE REQUIRED TO PAY ANY FEES OR COMMISSIONS?
- We will purchase all outstanding shares of 13 7/8% Senior Cumulative
Redeemable Preferred Stock that are properly tendered at the price of
$1,300.00 per share, net to you in cash. If you tender a fractional share, we
will pay you the price per share multiplied by that fraction of a share
tendered. See "Introduction" and "Special Factors -- 2. Purpose of the Offer;
Certain Effects of the Offer; Plans of the Company After the Offer."
- We will pay for shares purchased in our offer as soon as practicable after the
expiration of the offer period. You will receive the purchase price, net in
cash, without interest. Under no circumstances will we pay interest on the
purchase price, even if payment is delayed. See "The Offer -- 4. Acceptance
for Payment of Shares and Payment of Purchase Price."
- If you are the record owner of your shares and you tender your shares to us in
the offer, you will not have to pay brokerage fees or commissions. If you own
your shares through a broker or other nominee, and your broker tenders your
shares on your behalf, your broker or nominee may charge you a fee for doing
so. You should consult with your broker or nominee to determine whether any
charges will apply. You may also have to pay stock transfer taxes in certain
circumstances. See "The Offer -- 4. Acceptance for Payment of Shares and
Payment of Purchase Price."
DOES R&B FALCON HAVE THE FINANCIAL RESOURCES TO PAY FOR THE TENDERED SHARES?
- We will need approximately $482.6 million to purchase the maximum amount of
shares of our 13 7/8% Senior Cumulative Redeemable Preferred Stock and to pay
all of the expenses of the offer. On October 26, 2000, we agreed to sell
16,300,000 shares of our common stock in a public offering that is expected to
generate $399,700,000 of net proceeds, all of which will be applied to fund
the purchase of tendered shares, assuming all shares are tendered. Through our
wholly owned subsidiaries, we have sufficient cash to fund any balance of the
purchase price of the shares and the related expenses pursuant to the offer in
excess of the net proceeds. See "The Offer -- 9. Source and Amount of Funds."
- The completion of the public offering of our common stock is a condition to
our acceptance of the tendered shares. We expect the public offering of our
common stock to close on or about October 31, 2000, and expect to announce
that the financing condition has been satisfied shortly after the closing of
the public offering. See "The Offer -- 5. Certain Conditions of the Offer."
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IS R&B FALCON'S FINANCIAL CONDITION RELEVANT TO A HOLDER'S DECISION WHETHER TO
TENDER IN THE OFFER?
- If you decide to tender your shares, we do not believe that our financial
condition is relevant because we are offering to purchase your shares solely
for cash.
- If you decide not to tender your shares, we believe that our financial
condition is a relevant factor to consider because you will continue to be a
shareholder in our company. For this reason, summary financial information on
both a historical and pro forma basis (as if all of the outstanding shares of
our 13 7/8% Senior Cumulative Redeemable Preferred Stock have been tendered)
is included in this Offer to Purchase beginning on page 21. More comprehensive
financial information is included in the reports that we have filed with the
Securities and Exchange Commission. You can obtain copies of these reports in
the manner described in "The Offer -- 13. Where You Can Find More Information
About the Company and the Offer."
HOW WILL THE OFFER AFFECT THE SHARES THAT ARE NOT TENDERED?
- Our purchase of the shares of our 13 7/8% Senior Cumulative Redeemable
Preferred Stock will reduce the number of outstanding shares and the number of
holders. Depending upon the number of shares purchased, the liquidity and
market value of the remaining outstanding shares could be adversely affected.
See "Special Factors -- 2. Purpose of the Offer; Certain Effects of the Offer;
Plans of the Company After the Offer."
ARE THERE CONDITIONS TO OUR MERGER WITH TRANSOCEAN SEDCO FOREX THAT WILL AFFECT
THE SHARES THAT ARE NOT TENDERED?
- On August 19, 2000, we entered into an Agreement and Plan of Merger with
Transocean Sedco Forex Inc., Transocean Holdings Inc. and TSF Delaware Inc.
Our shares of 13 7/8% Senior Cumulative Redeemable Preferred Stock that are
not tendered in the offer and that are not redeemed as described below will
remain outstanding after the merger. The consummation of the merger is not a
condition to the offer. Transocean Sedco Forex has consented to the offer, and
the offer is conditioned upon Transocean Sedco Forex not withdrawing its
consent. We have no reason to believe that Transocean Sedco Forex will
withdraw its consent. See "Special Factors -- 1. Recent Developments."
- Under the terms of the merger agreement with Transocean Sedco Forex, it is a
condition to the merger that we exercise our optional redemption rights for
our 13 7/8% Senior Cumulative Redeemable Preferred Stock prior to the
consummation of the merger. Under the certificate of designation establishing
the shares, we have the right to redeem up to 105,000 shares on a pro rata
basis at a price of $1,138.75 per share, plus accrued and unpaid dividends,
with the proceeds of a public equity offering. If you do not tender your
shares in the offer, your shares will be subject to this redemption. We intend
to deliver notice of our intent to exercise our optional redemption right on
or before November 15, 2000, and to exercise this right on or before December
15, 2000. If no shares are tendered in the offer, approximately 28% of your
shares will be redeemed upon the exercise of our redemption right. If you do
not tender your shares in the offer and 105,000 or fewer shares remain
outstanding after the offer, all of your shares will be redeemed. See "Special
Factors -- 1. Recent Developments" and "Special Factors -- 2. Purpose of the
Offer; Certain Effects of the Offer; Plans of the Company After the Offer."
HOW WILL THE CONSUMMATION OF THE MERGER AFFECT THE SHARES THAT ARE NOT TENDERED?
- The terms of the certificate of designation establishing the shares provide us
with the option to pay dividends on shares of our 13 7/8% Senior Cumulative
Redeemable Preferred Stock in-kind. Covenants contained in the indentures
governing a substantial portion of our indebtedness limit our ability to pay
cash dividends, and we have therefore paid all dividends due and payable to
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date in-kind. Upon consummation of the merger with Transocean Sedco Forex, these
covenants are expected to be suspended and we expect to pay dividends on any
shares outstanding after the merger in cash. See "Special Factors -- 2. Purpose
of the Offer; Certain Effects of the Offer; Plans of the Company After the
Offer."
- We anticipate that for tax reasons associated with the merger, neither
Transocean Sedco Forex nor any of its affiliates (including us) is likely to
make a cash tender offer for any shares that remain outstanding after the
merger.
HOW LONG DOES A HOLDER HAVE TO DECIDE WHETHER TO TENDER ITS SHARES IN THE OFFER?
- You may tender your shares until the tender offer expires. The offer will
expire on Wednesday, November 29, 2000, at 5:00 p.m., New York City time. See
"The Offer -- 1. Number of Shares; Expiration Date." If you cannot deliver
everything necessary to make a valid tender by that time, you may be able to
use a guaranteed delivery procedure, which is described in "The Offer -- 2.
Procedure for Tendering Shares."
CAN THE OFFER BE EXTENDED, TERMINATED OR AMENDED?
- We can extend or amend the offer at any time, in our sole discretion. In
addition, we can terminate the offer, in our sole discretion, if at any time
any of the conditions to the offer are not satisfied. Any extension or
amendment, and any termination other than for nonsatisfaction of a condition,
will require Transocean Sedco Forex's consent.
- If we extend the offer, we may delay the acceptance of any shares that have
been tendered. See "The Offer -- 6. Extension of Tender Period; Termination;
Amendments."
- If we extend the offer, we will issue a press release no later than 9:00 a.m.
New York City time on the first business day after the offer would have
expired. See "The Offer -- 6. Extension of Tender Period; Termination;
Amendments."
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
- We are not required to complete the offer unless all of the conditions to the
offer are met. The most significant conditions are:
1. the completion of a public offering of our common stock generating at least
$399.7 million in net proceeds to be used to fund at least a portion of the
offer;
2. no withdrawal of the consent of Transocean Sedco Forex to the offer; and
3. the absence of governmental or court action prohibiting the offer.
- We do not expect any of these conditions to prevent us from completing the
offer. See "The Offer -- 5. Certain Conditions of the Offer."
- The consummation of the merger with Transocean Sedco Forex is not a condition
to the offer.
HOW DOES A HOLDER TENDER SHARES?
- If you decide to tender your shares, then on or prior to 5:00 p.m., New York
City time, on the expiration date you should do one of the following:
1. If you hold shares in book-entry form, tender through The Depositary Trust
Company's Automated Tender Offer Program and comply with the procedure for
book-entry transfer described in this Offer to Purchase.
2. If you are a record holder (i.e., a stock certificate has been issued to
you), send your stock certificates and a properly completed and signed
Letter of Transmittal to the American Stock
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Transfer & Trust Company, as the Depositary, at the address appearing on
the back cover of this document. See "The Offer -- 2. Procedure for
Tendering Shares."
- If you are a record holder, but your stock certificates are not immediately
available for delivery to the Depositary, you may be able to comply with the
guaranteed delivery procedure described in "The Offer -- 2. Procedures for
Tendering Shares."
- If the stock certificates are registered in the name of your broker or other
nominee, you should instruct your broker or other nominee to tender the shares
on your behalf by completing the form sent to you by the nominee and returning
the form to it; or contact your broker for assistance. See the instructions to
the Letter of Transmittal.
ONCE SHARES HAVE BEEN TENDERED IN THE OFFER, CAN A HOLDER WITHDRAW ITS TENDER?
- You may withdraw a tender of shares at any time before 5:00 p.m., New York
City time, on Wednesday, November 29, 2000. If we extend the tender offer, you
may withdraw your shares at any time before 5:00 p.m., New York City time, on
the new expiration date. See "The Offer -- 3. Withdrawal Rights."
- In addition, if we have not already accepted your shares for payment, you may
withdraw shares you previously tendered after 12:00 midnight, New York City
time, on Tuesday, December 26, 2000. See "The Offer -- 3. Withdrawal Rights."
- If you tendered your shares by giving instructions to a broker or bank, you
must instruct the broker or bank to arrange for a withdrawal of your shares.
WHAT IS THE PROCEDURE FOR WITHDRAWING TENDERED SHARES?
- You may withdraw tendered shares at any time before the offer expires by
mailing or faxing your notice of withdrawal to the Depositary if your shares
are held in your name or to your broker or bank if they are held in their
name. For the notice to be effective, the Depositary must receive your notice
of withdrawal before the offer expires. See "The Offer -- 3. Withdrawal
Rights."
WHAT DOES R&B FALCON'S BOARD OF DIRECTORS THINK OF THE OFFER?
- After consideration of many factors, our board of directors has, at a meeting
at which a quorum was present, unanimously determined that the offer and the
offer price is fair. In addition, we asked an investment bank, Morgan Stanley
& Co. Incorporated, to consider the offer. Morgan Stanley delivered an opinion
to our Board of Directors that, as of October 17, 2000 and subject to the
assumptions and considerations described in the opinion, the offer price of
$1,300 per share was fair, from a financial point of view, to holders of
shares of our 13 7/8% Senior Cumulative Redeemable Preferred Stock. Morgan
Stanley's complete opinion is attached as an exhibit to this Offer to
Purchase. Our Board of Directors carefully considered the opinion and other
factors and, at a meeting at which a quorum was present, the directors present
unanimously determined that the offer and the offer price are fair. See
"Special Factors -- 3. Fairness of the Offer."
- While the Board of Directors has approved the offer, it is not making any
recommendation as to whether or not you should tender your shares. You must
decide whether to tender your shares and, if so, how many shares to tender.
WHAT IS THE RECENT MARKET PRICE OF THE SHARES?
- Shares of our 13 7/8% Senior Cumulative Redeemable Preferred Stock are
currently listed on the New York Stock Exchange under the symbol "FLC NA09."
From October 13, 2000, the date the shares were first listed on the New York
Stock Exchange, until the date immediately prior
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to the commencement of the Offer, no trades in the shares have been reported.
Prior to October 13, 2000, there was no established publicly available
reporting or trading system for the shares. We believe that the trading in the
shares has been limited and sporadic. See "The Offer -- 7. Price Range of
Shares; Dividends."
- Before deciding whether to tender, you should obtain a current market
quotation for the shares, if available.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF TENDERING SHARES?
- The receipt of cash for shares pursuant to the offer will be a taxable
transaction for United States federal income tax purposes and possibly for
state and local income tax purposes as well. In general, a stockholder who
sells shares pursuant to the offer will recognize gain or loss for United
States federal income tax purposes equal to the difference, if any, between
the amount of cash received and the stockholder's adjusted tax basis in the
shares sold pursuant to the offer. In general, capital gains recognized by an
individual will be subject to a maximum United States federal income tax rate
of 20% if the shares were held for more than one year, and if held for one
year or less, they will be subject to tax at ordinary income tax rates.
Because individual circumstances may differ, you should consult your tax
advisor to determine the particular tax effects to you. See "Special
Factors -- 6. United States Federal Income Tax Consequences."
WHOM CAN HOLDERS TALK TO IF THEY HAVE QUESTIONS?
- You may contact the dealer managers for the offer, Goldman, Sachs & Co., at
800-828-3182, or Morgan Stanley & Co. Incorporated, at 800-624-1808, or your
broker, dealer, commercial bank, trust company or other nominee, for
assistance concerning the terms of the offer. You may also contact Georgeson
Shareholder Communications Inc., the information agent, at 800-223-2064 if you
have any requests for assistance or for additional copies of this document,
the Letter of Transmittal or related documents. The addresses and phone
numbers of these representatives can be found on the back cover of this
document.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
SPECIAL FACTORS
1. RECENT DEVELOPMENTS................................... 2
2. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER;
PLANS OF THE COMPANY AFTER THE OFFER.................. 3
3. FAIRNESS OF THE OFFER................................. 4
4. FAIRNESS OPINION...................................... 6
5. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................ 10
6. UNITED STATES FEDERAL INCOME TAX CONSEQUENCES......... 10
THE OFFER
1. NUMBER OF SHARES; EXPIRATION DATE..................... 13
2. PROCEDURE FOR TENDERING SHARES........................ 14
3. WITHDRAWAL RIGHTS..................................... 16
4. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF
PURCHASE PRICE........................................ 17
5. CERTAIN CONDITIONS OF THE OFFER....................... 18
6. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS... 19
7. PRICE RANGE OF SHARES; DIVIDENDS...................... 20
8. CERTAIN INFORMATION CONCERNING THE COMPANY AND THE
SHARES................................................ 20
9. SOURCE AND AMOUNT OF FUNDS............................ 28
10. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES;
TERMINATION OF REGISTRATION UNDER THE EXCHANGE ACT.... 28
11. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS........... 28
12. FEES AND EXPENSES; PERSONS RETAINED AND COMPENSATED... 28
13. WHERE YOU CAN FIND MORE INFORMATION ABOUT THE COMPANY
AND THE OFFER......................................... 30
14. MISCELLANEOUS......................................... 30
SCHEDULE I
EXHIBIT A
</TABLE>
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To the Holders of R&B Falcon Corporation's 13 7/8% Senior Cumulative Redeemable
Preferred Stock:
INTRODUCTION
R&B Falcon Corporation, a Delaware corporation (the "Company"), is offering
to purchase any and all outstanding shares of its 13 7/8% Senior Cumulative
Redeemable Preferred Stock, par value $0.01 per share, outstanding at any time
before the expiration of the offer (the "Shares"), at $1,300.00 per Share (the
"Purchase Price"), net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth herein and in the related Letter of
Transmittal (which together constitute the "Offer").
As of October 26, 2000, the Company had issued and outstanding 356,961.014
Shares. In addition, the Company anticipates that it will issue 12,382.085
additional Shares as a payment-in-kind of dividends on November 1, 2000 to the
holders of record of the Shares on October 15, 2000 (the "PIK Shares").
Accordingly, the Company expects that the Offer will effectively be for a total
of 369,343.099 Shares. As of October 26, 2000, there was one holder of record of
Shares.
Because the Offer includes all Shares that are issued and outstanding at
any time during the Offer, the Offer includes an offer to purchase the PIK
Shares. Any tender of Shares prior to November 1, 2000 will not include a tender
of the PIK Shares. In order for a holder to tender all of its Shares, such
holder may either (i) tender all of its Shares before November 1, 2000 in
accordance with the procedures described in this Offer to Purchase, and then
tender the PIK Shares issued on November 1, 2000 by complying with those
procedures a second time, or (ii) tender all of its Shares after November 1,
2000 in accordance with the procedures described in this Offer to Purchase.
The Company reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates, the right to purchase all or
any portion of the Shares tendered in the Offer, but any such transfer or
assignment will not relieve the Company of its obligations under the Offer and
will in no way prejudice the right of tendering holders to receive payment for
Shares validly tendered and accepted for payment pursuant to the Offer.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE "THE
OFFER -- 5. CERTAIN CONDITIONS OF THE OFFER."
THE COMPANY'S BOARD OF DIRECTORS HAS APPROVED THE OFFER. HOWEVER, NEITHER
THE COMPANY NOR ANY OF ITS DIRECTORS OR EXECUTIVE OFFICERS MAKES ANY
RECOMMENDATION TO HOLDERS OF THE SHARES AS TO WHETHER TO TENDER ALL OR ANY
SHARES. HOLDERS OF THE SHARES MUST MAKE THEIR OWN DECISION AS TO WHETHER TO
TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER. SEE "SPECIAL FACTORS -- 2.
PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF THE COMPANY AFTER
THE OFFER."
If you hold Shares in your own name and you tender your Shares directly to
the American Stock Transfer & Trust Company (the "Depositary"), you will not be
obligated to pay brokerage commissions, solicitation fees or, subject to
Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase
of Shares by the Company. If you hold Shares through brokers or banks, you
should consult with them to determine whether transaction costs are applicable
if you tender Shares through them and not directly to the Depositary. HOWEVER,
IF YOU FAIL TO COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE
LETTER OF TRANSMITTAL, YOU MAY BE SUBJECT TO A REQUIRED FEDERAL INCOME TAX
BACKUP WITHHOLDING OF 31% OF THE GROSS PAYMENTS PAYABLE TO YOU PURSUANT TO THE
OFFER. SEE "THE OFFER -- 2. PROCEDURE FOR TENDERING SHARES."
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Morgan Stanley & Co. Incorporated ("Morgan Stanley") has delivered a
written opinion to the Board of Directors of the Company (the "Board"), dated
October 17, 2000, that, as of the date of such opinion, the consideration to be
paid to holders of the Shares pursuant to the Offer was fair to them from a
financial point of view. See "Special Factors -- 4. Fairness Opinion." The full
text of the opinion is attached to this Offer to Purchase as Exhibit A. You are
urged to read the entire opinion carefully for assumptions made, matters
considered and limits of Morgan Stanley's review.
The Shares are listed and traded on the New York Stock Exchange (the
"NYSE") under the symbol "FLC NA09." Since October 13, 2000, the date the Shares
were first listed on the NYSE, no trades in the Shares have been reported. You
are urged to obtain current market quotations for the Shares, if available,
before deciding to tender Shares in the Offer.
The address of the principal executive office of the Company is 901
Threadneedle, Houston, Texas, 77079-2911, and the telephone number at that
address is (281) 496-5000.
The name, business address, citizenship, present principal occupation or
employment and five-year employment history of each of the executive officers
and directors of the Company are set forth in Schedule I of this Offer to
Purchase.
SPECIAL FACTORS
1. RECENT DEVELOPMENTS.
On August 19, 2000, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Transocean Sedco Forex Inc. ("Transocean
Sedco Forex"), Transocean Holdings Inc., a wholly-owned subsidiary of Transocean
Sedco Forex, and TSF Delaware Inc., a wholly-owned subsidiary of Transocean
Holdings Inc. Under the terms of the Merger Agreement, each share of the
Company's common stock will be converted into the right to receive 0.5
Transocean Sedco Forex ordinary shares, and the Company will become a subsidiary
of Transocean Holdings Inc., with Transocean Holdings Inc. holding all of the
Company's then outstanding shares of common stock (the "Merger").
The Merger is conditioned on, among other things,
- approval of the holders of the Company's common stock and the holders of
Transocean Sedco Forex ordinary shares,
- clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(the "Hart-Scott-Rodino Act") and the satisfaction of other customary
regulatory requirements,
- the completion of an offering of common stock by the Company and the
redemption of up to 105,000 Shares that will be funded with the proceeds
of such common stock offering,
- the rating of certain senior debt of the Company as investment grade by
Moody's Investors Service, Inc. and Standard & Poor's Ratings Group, and
- other customary conditions.
The tender of any Shares in the Offer is not a condition to the Merger.
Transocean Sedco Forex and the Company made filings with respect to the
Merger under the Hart-Scott-Rodino Act on September 5, 2000. Each of Transocean
Sedco Forex and the Company has received a second request for information and
documentary materials from the Department of Justice pursuant to its authority
under the Hart-Scott-Rodino Act. The second request is intended to assist the
Department of Justice in completing its competitive analysis of the proposed
Merger. Both Transocean Sedco Forex and the Company intend to respond promptly
to the information request, which has the effect of extending the waiting period
under
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the Hart-Scott-Rodino Act by 20 calendar days following both companies'
compliance with the request. No assurance can be given as to when or if the
Hart-Scott-Rodino Act and other regulatory conditions to the Merger will be
satisfied.
We expect that the Merger will close in the first quarter of 2001.
The Merger Agreement provides that the Shares that are outstanding
immediately before the Merger will remain outstanding following the Merger.
Therefore, the Shares that are not tendered in the Offer or redeemed after the
Offer will remain outstanding following the Merger.
The Company anticipates that for tax reasons associated with the Merger,
neither Transocean Sedco Forex nor any of its affiliates (including the Company)
is likely to make a cash tender offer for any Shares that remain outstanding
after the Merger. The consummation of the Merger is not a condition to the
Offer. Transocean Sedco Forex has consented to the Offer, and the Offer is
conditioned upon Transocean Sedco Forex not withdrawing such consent.
Under the Merger Agreement, upon consummation of the Merger, all of the
current directors of the Company will cease to be directors of the Company.
2. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF THE COMPANY
AFTER THE OFFER.
The purpose of the Offer is to reduce or eliminate the dividend payments
made to the holders of the Shares by reducing or eliminating the number of
outstanding Shares. Dividends accrue on the Shares at the rate of 13 7/8% per
annum, which is higher than the interest rate paid on all of the Company's
indebtedness. In addition, the dividends are not deductible for tax purposes,
whereas interest paid on the Company's outstanding indebtedness is. Reduction or
elimination of dividends on the Shares may also improve the rating of the
Company's indebtedness. The Company anticipates that the reduction or
elimination of these dividend payments will improve the Company's capital
structure and provide the Company with more financial flexibility.
All of the Shares purchased by the Company upon the consummation of the
Offer will be retired by the Company.
The Company's purchase of Shares pursuant to the Offer will reduce the
number of holders of Shares and the number of Shares that might otherwise trade
publicly. Depending upon the number of Shares so purchased, the liquidity and
market value of the remaining Shares held by the public could be adversely
affected. The extent of the market for the Shares and the availability of
quotations after the expiration of the Offer will depend upon such factors as
the number of stockholders remaining at such time, the interest in maintaining a
market in the Shares on the part of securities firms, any future termination of
registration under the Exchange Act and other factors.
Following the expiration of the Offer, the Company may, in its sole
discretion, determine to purchase any remaining Shares through privately
negotiated transactions, open market purchases or otherwise, on such terms and
at such prices as the Company may determine from time to time, the terms of
which purchases or offers could differ from those of the Offer, except that the
Company will not make any such purchases of Shares other than upon exercise of
the redemption right described below, until the expiration of at least ten
business days after the termination of the Offer pursuant to Rule 13e-4(f)(6)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Any
possible future purchases of Shares by the Company will depend on many factors,
including the market price of the Shares, the Company's business and financial
position, alternative investment opportunities available to the Company, the
results of the Offer, and general economic and market conditions.
Under the certificate of designation establishing the Shares (the
"Certificate of Designation"), the Company has the right to redeem up to 105,000
Shares at a price of $1,138.75 per
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share, plus accrued and unpaid dividends to the date of redemption, with the
proceeds of a public equity offering (the "Equity Clawback"). Under the terms of
the Merger Agreement, it is a condition to the Merger that the Company exercise
the Equity Clawback prior to the Merger. If a holder does not tender its Shares
in the Offer, such Shares will be subject to the Equity Clawback. The Company
intends to give notice of its intent to exercise the Equity Clawback on or
before November 15, 2000, and to exercise the Equity Clawback on or before
December 15, 2000. If a holder does not tender its Shares in the Offer and no
other Shares are tendered in the Offer, approximately 28% of such holder's
Shares will be redeemed upon the exercise of the Equity Clawback. If a holder
does not tender its Shares in the Offer and 105,000 or fewer Shares remain
outstanding after the Offer, all of such holder's Shares will be redeemed upon
exercise of the Equity Clawback.
On October 26, 2000, the Company entered into an underwriting agreement to
sell 16,300,000 shares of its common stock in a public offering, the net
proceeds of which will be used to fund the purchase price in the tender offer
and, if required, to fund the Equity Clawback (the "Common Stock Offering").
Under the Merger Agreement, the Company was required to, and did, obtain the
consent of Transocean Sedco Forex to the Common Stock Offering.
In accordance with the Merger Agreement, the Company will amend its
certificate of incorporation immediately before the effective time of the Merger
to grant each Share 0.1787 votes in the election of directors of the Company
voting together with the common stockholders. However, the Company expects that
Transocean Holdings Inc. will be in a position to elect all of the directors of
the Company after the Merger.
The terms of the Certificate of Designation provide the Company with the
option to pay dividends on the Shares in-kind. Covenants contained in the
indentures governing a substantial portion of the Company's indebtedness limit
its ability to pay cash dividends, and the Company has therefore paid all
dividends due and payable to date in-kind. Upon consummation of the Merger,
these covenants are expected to be suspended and the Company expects to pay
dividends after the Merger in cash.
The completion of the Merger is subject to numerous conditions, not all of
which have been satisfied. It is possible that we will not complete the Merger.
If we do not complete the Merger, we will continue to operate as a separate
company, and will likely not have access to the greater financial resources that
we believe the Merger will afford us.
THE BOARD OF DIRECTORS HAS APPROVED THE OFFER. HOWEVER, NEITHER THE COMPANY
NOR ANY OF ITS DIRECTORS OR EXECUTIVE OFFICERS MAKES ANY RECOMMENDATION TO ANY
STOCKHOLDER AS TO WHETHER TO TENDER ALL OR ANY SHARES. EACH STOCKHOLDER MUST
MAKE HIS OR HER OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW MANY
SHARES TO TENDER.
3. FAIRNESS OF THE OFFER.
The Board believes that the Offer is fair to holders of Shares and, at a
meeting of the Board at which a quorum was present, the directors present
unanimously approved the Offer. In evaluating the Offer, the Board relied upon
its knowledge of the business, financial condition and prospects of the Company
as well as the advice of the Company's financial and legal advisors. In making
its determination regarding the fairness of the Offer, the Board considered a
number of factors, including the following. The Board generally gave more weight
to the factors described at the beginning of the following list, and less weight
to the factors described at the end of the following list.
- The likelihood of the completion of the Merger, and the effect of the
Merger on future dividend payments on the Shares. The Board noted that
the Company continues to believe that the Merger is likely to close, with
a likely closing date before the end of the first
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<PAGE> 14
quarter of 2001. The Board noted that it is a condition to the Merger
under the Merger Agreement that certain of the Company's senior debt be
rated as investment grade. The Board noted that once this debt is rated
as investment grade, the covenants prohibiting the Company from paying
dividends in cash will be suspended, and dividends on the Shares after
the Merger will likely be paid in cash, rather than in kind.
- The fact that, if the Merger is not completed, the Company would not have
access to the greater financial resources expected as a result of the
Merger, and the likelihood that Shares would again trade at levels
similar to those at which they traded prior to the announcement of the
Merger. The Company believes that, immediately prior to the announcement
of the Merger, the Shares had traded in the range of approximately $1,160
per share. The Company was not aware of any trading in the Shares after
the announcement of the Merger, and noted that no Shares had traded on
the NYSE in the two days prior to the Board meeting that the Shares had
been listed on the NYSE. The Board noted that if the Merger is not
completed, the Company will continue to pay dividends on the Shares in
kind and that, without the increased financial resources expected to be
available to the Company after the Merger, it was likely that the Shares
would trade in the same range as before the Merger announcement, or
possibly at lower prices.
- The fairness opinion of Morgan Stanley. The Board considered the
financial analysis and the written opinion of Morgan Stanley delivered on
October 17, 2000 to the effect that as of such date and based upon and
subject to certain matters stated in such opinion, the $1,300.00 purchase
price to be received by holders of the Shares pursuant to the Offer was
fair, from a financial point of view, to such holders.
- The condition to the Merger that the Company exercise its redemption
rights for the Shares. The Board noted that it is a condition to the
Merger under the Merger Agreement that the Company exercise the Equity
Clawback under the Certificate of Designation for the Shares. The
exercise of the Equity Clawback would result in the Company redeeming
approximately 28% of the currently outstanding Shares. The redemption
price for this partial redemption under the Certificate of Designation is
$1,138.75 per share plus accrued and unpaid dividends. The Board noted
that the purchase price in the Offer is significantly in excess of this
redemption price.
- Alternatives to the Offer. The Board evaluated possible alternatives to
the Offer. The Board viewed the primary alternative to the Offer to be
for the Company to exercise its redemption rights as required by the
Merger Agreement, and to leave the remaining Shares outstanding. The
Board noted that after the Merger, because of the suspension of the
covenants in the Company's indentures, it was possible that the Company
could exchange the remaining Shares for debentures under the terms of the
Certificate of Designation, thereby enabling the Company to deduct the
interest payable under the indentures. The Board rejected the use of only
its redemption rights because the Offer followed by the Equity Clawback
was likely to result in a greater reduction in the number of outstanding
Shares.
- Market Price and Premium. The Board considered that, with the additional
financial resources likely to be available to the Company as a result of
the Merger, it was likely that any Shares outstanding after the Merger
would trade at levels higher than they had traded prior to the
announcement of the Merger. The Board believed that the tender offer
price was at a premium to the likely levels at which the Shares might
trade after the Merger.
- Transaction Structure. The Board evaluated the benefits of the
transaction being structured as an immediate cash tender offer for all
outstanding Shares, thereby enabling stockholders who tender their Shares
the opportunity to obtain cash for their Shares at the earliest possible
time and to receive the purchase price for all of their tendered Shares.
In addition, the Board considered the fact that the Offer provides
stockholders with the
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<PAGE> 15
opportunity to dispose of Shares without the usual transaction costs
associated with a market sale.
- Financing. The Board considered the fact that the Company will have
commenced a public offering of its common stock to fund a significant
portion of the purchase price for the Shares tendered in the Offer prior
to initiating the Offer, and that this offering would close within a few
days after commencing the Offer. The Board also considered that the
Company and its subsidiaries have sufficient cash to fund the balance of
the purchase price in the Offer and the expenses of the Offer if these
amounts are in excess of the net proceeds from the common stock offering.
The Board noted that although the Offer is conditioned on financing, it
is expected that the financing condition will be satisfied within a
matter of days after commencement of the Offer.
- Potential Trading Market for the Shares After the Merger. The Board
considered the likely trading market for the Shares after the Merger. The
Board noted that the Shares would be the only remaining publicly traded
equity securities of the Company, and all of the common stock of the
Company will be owned indirectly by Transocean Sedco Forex. The Board
noted that only approximately 265,000 Shares would remain outstanding
after the Equity Clawback required by the Merger Agreement, assuming no
Shares are tendered in the Offer, and the Board considered the
possibility that no significant market will develop or be maintained for
the remaining Shares after the Merger.
- The Company's current business strategy and future prospects. The Board
considered information provided by Company management as to the business,
financial conditions, results of operations, current business strategy
and future prospects of the Company with and without the Merger, recent
trends in the market in which the Company operates, the Company's
position in such market, the historical and recent market prices for the
Shares, and potential new business initiatives, including the Merger.
A majority of the directors who are not employees of the Company have not
retained an unaffiliated representative to act solely on behalf of unaffiliated
stockholders for the purposes of negotiating the terms of the Offer. There is no
stockholder vote required in connection with the Offer. There are no appraisal
rights available to holders of Shares in connection with the Offer.
4. FAIRNESS OPINION.
The Company retained Morgan Stanley to provide the Board with financial
advisory services and a financial fairness opinion in connection with the Offer.
Morgan Stanley was selected to act as the Company's financial advisor based on
Morgan Stanley's qualifications, expertise and reputation and its knowledge of
the business and affairs of the Company. At the meeting of the Board on October
17, 2000, Morgan Stanley rendered to the Board its oral opinion, subsequently
confirmed in writing, that as of that date, and subject to and based on the
various considerations set forth in its opinion, the price to be received by the
holders of the Shares pursuant to the Offer was fair from a financial point of
view to the holders of the Shares.
Morgan Stanley has also acted as a financial advisor to the Company in
connection with the Merger, including providing a fairness opinion to the Board.
In delivering its fairness opinion to the Board with respect to the offer price,
Morgan Stanley did not address the Merger or the relative fairness of the
consideration to be received by the holders of the Shares in the Offer and the
consideration to be received by the holders of the Company's common stock in the
Merger.
THE FULL TEXT OF MORGAN STANLEY'S WRITTEN OPINION, DATED AS OF OCTOBER 17,
2000, WHICH SETS FORTH, AMONG OTHER THINGS, THE ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE SCOPE OF THE REVIEW
UNDERTAKEN BY MORGAN STANLEY IN RENDERING ITS OPINION, IS ATTACHED AS EXHIBIT A
TO THIS OFFER TO PURCHASE. HOLDERS OF THE SHARES ARE URGED TO, AND SHOULD, READ
THIS OPINION CAREFULLY AND IN ITS ENTIRETY. MORGAN STANLEY'S OPINION IS DIRECTED
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TO THE BOARD OF DIRECTORS OF THE COMPANY, ADDRESSES ONLY THE FAIRNESS FROM A
FINANCIAL POINT OF VIEW OF THE OFFER PURSUANT TO THE OFFER TO PURCHASE TO THE
HOLDERS OF THE SHARES, AND DOES NOT ADDRESS ANY OTHER ASPECT OF THE OFFER NOR
DOES IT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF THE SHARES TO TENDER SHARES
PURSUANT TO THE OFFER TO PURCHASE. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE OPINION.
In connection with rendering its opinion, Morgan Stanley, among other
things:
- reviewed certain publicly available financial statements and other
information of the Company and Transocean Sedco Forex, respectively;
- reviewed certain internal financial statements and other financial and
operating data concerning the Company and Transocean Sedco Forex prepared
by the management of the Company and Transocean Sedco Forex,
respectively;
- reviewed certain financial forecasts prepared by the managements of the
Company and Transocean Sedco Forex, respectively;
- discussed the past and current operations and financial condition and the
prospects of the Company and Transocean Sedco Forex, including
information relating to certain strategic, financial and operational
benefits anticipated from the Merger, with senior executives of the
Company and Transocean Sedco Forex, respectively;
- reviewed the pro forma impact of the Offer and its financing on the
Company's earnings per share, cash flow, consolidated capitalization and
financial ratios;
- reviewed the trading activity and prices for the Shares;
- compared the financial performance and credit ratings of the Company and
Transocean Sedco Forex and the prices and trading activity of the Shares
with those of certain other publicly-traded companies, comparable with
the Company and Transocean Sedco Forex, respectively, and their
securities;
- discussed the strategic and financial considerations for the Offer with
the management and Board of the Company;
- participated in discussions and negotiations among representatives of the
Company and Transocean Sedco Forex and their respective financial and
legal advisors;
- reviewed the Merger Agreement and certain related documents;
- reviewed the Certificate of Designation relating to the Shares and the
draft Offer to Purchase;
- reviewed the past, current and anticipated financial returns of the
Shares;
- reviewed the financial terms, to the extent publicly available, of
certain comparable tender offers to purchase securities deemed relevant;
and
- performed such other analyses and considered such other factors as Morgan
Stanley deemed appropriate.
In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by it for the purposes of its opinion. With respect to the financial
forecasts, including information relating to certain strategic, financial and
operational benefits anticipated from the Merger, Morgan Stanley assumed that
they were reasonably prepared on bases reflecting the best currently available
estimates and judgments of the future financial performance of the Company and
Transocean Sedco Forex, respectively. Morgan Stanley did not make any
independent valuation or appraisal of the assets or liabilities of the Company
or Transocean Sedco Forex; nor was it furnished with
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<PAGE> 17
any such appraisals. In addition, Morgan Stanley assumed that the Merger and the
Offer, if consummated, would be consummated in accordance with the terms set
forth in the Merger Agreement and the draft Offer to Purchase, respectively,
including that the Merger would be treated as a tax-free reorganization pursuant
to the Internal Revenue Code of 1986, as amended. The opinion of Morgan Stanley
is necessarily based on financial, economic, market and other conditions as in
effect on, and the information made available to Morgan Stanley as of October
17, 2000.
The following is a brief summary of the material financial analyses
performed by Morgan Stanley in connection with its oral opinion and the
preparation of its written opinion letter dated October 17, 2000.
OFFER PRICE ANALYSIS. In analyzing the value of the Shares Morgan Stanley
assumed, based on the Certificate of Designation and discussions with Transocean
Sedco Forex management, that the dividends will immediately convert to cash pay
upon completion of the Merger and that the Company under the terms of the Merger
Agreement must exercise the Equity Clawback.
Morgan Stanley discounted the Shares' quarterly cash flows through the May
1, 2004 call date, with the dividends converting to cash pay on May 1, 2001.
Assuming a tender settlement date of December 1, 2000 and a cash pay dividend
date of May 1, 2001, the offer price of $1,300 per Share is mathematically
equivalent to clawing back an aggregate of 105,000 shares at a full price
including accrued interest of $1,150.31 per Share and tendering for the
remaining 264,343.099 shares in aggregate at a price of $1,359.46 per Share. As
of October 16, 2000, $1,359.46 per Share on the non-clawed back shares is
equivalent to a tender spread to call date on a cash pay basis of approximately
treasury yield minus 75 basis points. Morgan Stanley noted that the majority of
completed non-investment grade tender offers over the past two years have been
priced at treasury yield plus 50 basis points to the call date.
Morgan Stanley also noted that a stockholder that does not participate in
the Offer would have at least 28.4% of their Shares clawed back at $1,138.75 per
Share, and thus a secondary market value of the preferred securities of
$1,359.46 per Share would be needed to produce an economic value equivalent to
the cash tender price. Morgan Stanley noted that while the Shares were trading
infrequently and on a negotiated basis, prior to the announcement of the Merger,
the Shares were quoted at an estimated value of between $1,150 to $1,180 per
Share.
PRECEDENT TRANSACTION. While the terms and conditions of all tenders
differ, Morgan Stanley reviewed the August 1998 tender for Teleport
Communication Groups' 11.125% senior discount notes due July 1, 2007 (zero
coupon until July 1, 2001) since it shared some characteristics with the Offer.
AT&T Corp. acquired Teleport Communications in 1998. The Teleport notes
contained a provision allowing the issuer to convert to cash pay at the accreted
value prior to July 2001. The Teleport Communications tender was launched at
treasury yield plus 12.5 basis points to the call date on a cash pay basis to
the 2001 call date. Morgan Stanley noted that the offer price on the Shares not
redeemed in the Equity Clawback is equivalent to a tender spread to call date on
a cash pay basis of approximately treasury yield minus 75 basis points.
No transaction utilized as a comparison is identical to the Offer.
In connection with the review of the Offer by the Board, Morgan Stanley
performed a variety of financial and comparative analyses for purposes of its
opinion. The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. In arriving
at its opinion, Morgan Stanley considered the results of all of its analyses as
a whole and did not attribute any particular weight to any particular analysis
or factor considered by it. Furthermore, Morgan Stanley believes that selecting
any portion of its analyses or factors considered by it, without considering all
analyses and factors as a whole, would create an incomplete view of the process
underlying its opinion. In addition, Morgan Stanley may have given various
analyses and factors more or less weight than other analyses and factors and may
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<PAGE> 18
have deemed various assumptions more or less probable than other assumptions, so
that the results from any particular analysis described above should therefore
not be taken to be Morgan Stanley's view of the actual value of the Shares.
In performing its analyses, Morgan Stanley made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of the Company or Transocean
Sedco Forex. Any estimates contained in Morgan Stanley's analysis are not
necessarily indicative of future results or actual values, which may be
significantly more or less favorable than those suggested by such estimates. The
analyses were prepared solely as part of Morgan Stanley's analysis of the
fairness from a financial point of view of the Offer pursuant to the Offer to
Purchase to the holders of the Shares, and were conducted in connection with the
delivery by Morgan Stanley of its opinion dated October 17, 2000 to the Board.
The analyses do not purport to be appraisals or to reflect the prices at which
the Shares actually may be valued or the prices at which the Shares may actually
trade in the marketplace. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty.
In addition, as described above, Morgan Stanley's opinion and presentation
to the Board was one of many factors taken into consideration by the Board in
making its decision to approve the Offer. Consequently, the Morgan Stanley
analyses as described above should not be viewed as determinative of the opinion
of the Board with respect to the value of the Shares or of whether the Board
would have been willing to agree to a different offer price. The Purchase Price
pursuant to the Offer to Purchase and other terms of the Offer to Purchase were
determined by the Board and were approved by the Board. Morgan Stanley did not
recommend any specific offer price to the Board or that any given offer price
constituted the only appropriate offer price for the Offer to Purchase.
Morgan Stanley is an internationally recognized investment banking and
advisory firm. Morgan Stanley, as part of its investment banking and financial
advisory business, is continuously engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In the ordinary course of Morgan Stanley's trading, brokerage and
financing activities, Morgan Stanley or its affiliates may at any time hold long
or short positions, trade or otherwise effect transactions, for its own account
or for the account of customers, in the equity or debt securities or senior
loans of the Company or Transocean Sedco Forex.
Pursuant to an engagement letter, dated October 16, 2000 between Morgan
Stanley and the Company, Morgan Stanley provided a financial opinion and
financial advice in connection with the Offer. The Company agreed to pay Morgan
Stanley a customary fee for providing a fairness opinion in connection with the
Offer. Morgan Stanley will also receive compensation as a dealer manager as
described in "The Offer -- 12. Fees and Expenses; Persons Retained and
Compensated." In addition, the Company has agreed to indemnify Morgan Stanley
and its affiliates, their respective directors, officers, agents and employees
and each person, if any, controlling Morgan Stanley or any of its affiliates
against certain liabilities and expenses, including certain liabilities under
the federal securities laws, related to or arising out of Morgan Stanley's
engagement and any related transactions. In the past, Morgan Stanley and its
affiliates have provided financial advisory services for the Company and have
received fees for the rendering of these services. In connection with the
Merger, the Company has agreed to pay Morgan Stanley a fee between 0.200% to
0.295% of the aggregate value of the Company at the time of the closing of the
Merger. The full text of Morgan Stanley's presentation to the Board on October
17, 2000 has been included as Exhibit (a)(5) to the Schedule TO filed by the
Company in connection with the Offer and the foregoing summary is qualified by
reference to that exhibit.
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5. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of October 26, 2000, none of the directors or executive officers of the
Company, except Arnold L. Chavkin, owned any Shares. Mr. Chavkin, one of the
directors of the Company, is a partner of Chase Capital Partners. Chase Capital
Partners is the general partner of Chase Equity Associates, L.P., which owns
26,835 Shares as of October 26, 2000. Mr. Chavkin disclaims beneficial ownership
of these Shares. Mr. Chavkin has informed the Company that Chase Equity
Associates, L.P. has not engaged in any transactions in the Shares during the
past sixty (60) days. Mr. Chavkin has advised the Company that Chase Equity
Associates, L.P. currently intends to tender its Shares in the Offer.
Chase Equity Associates, L.P., which beneficially owns approximately 7.3%
of the outstanding Shares, is the only holder known by the Company to be the
beneficial owner of more than 5% of the outstanding Shares.
The Company and its affiliates, including its executive officers and
directors, will be prohibited under applicable federal securities law from
repurchasing additional Shares outside of the Offer until at least the 10th
business day after the Expiration Date. The Company has obtained exemptive
relief from the Securities and Exchange Commission (the "Commission") that
confirms that the prohibition will not apply to the Equity Clawback of the
Shares under the terms of the Certificate of Designation during the Offer or
within 10 business days after expiration of the Offer. Following such time, if
any Shares remain outstanding, the Company may purchase additional Shares in the
open market, in private transactions, through a subsequent tender offer, or
otherwise, any of which may be consummated at purchase prices higher or lower
than that offered in the Offer. The decision to repurchase additional Shares, if
any, will depend upon many factors, including the market price of the Shares,
the results of the Offer, the business and financial position of the Company,
and general economic and market conditions. Any such repurchase may be on the
same terms or on terms more or less favorable to holders than the terms of the
Offer as described in this Offer to Purchase.
6. UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
In General. The following summary is a general discussion of the material
United States federal income tax consequences relating to the Offer. The summary
is based upon current provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and existing final, temporary and proposed Treasury
Regulations, published rulings of the Internal Revenue Service (the "IRS") and
judicial decisions, all of which are subject to prospective and retroactive
changes. Except as otherwise provided, this summary deals only with Shares held
by U.S. Holders (as defined below) as capital assets within the meaning of
Section 1221 of the Code and does not address tax consequences that may be
relevant to investors in special tax situations, such as certain financial
institutions, tax-exempt organizations, insurance companies, dealers in
securities or currencies, or stockholders holding the Shares as part of a hedge
or hedging transaction or as a position in a straddle for tax purposes. The
Company has the right to assign, in whole or in part, to one or more of its
affiliates, the right to purchase all or any portion of the Shares tendered in
the Offer. For purposes of this summary, a sale of the Shares pursuant to the
Offer includes a purchase by a wholly-owned U.S. corporate affiliate of the
Company. A sale of the Shares pursuant to the Offer to an affiliate of the
Company that is not a U.S. corporation or that does not meet certain ownership
tests may result in U.S. federal income tax consequences different from those
described below. Unless otherwise stated, any reference to the Shares in this
summary includes Shares received as an in-kind dividend distribution. The
Company will not seek a ruling from the IRS with regard to the tax matters
discussed below.
The tax discussion set forth below is included for general information
only. The tax consequences of a sale pursuant to the Offer may vary depending
upon, among other things, the particular facts and circumstances of the
tendering stockholder. No information is provided herein
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as to the state, local or foreign tax consequences of the transaction
contemplated by the Offer. Stockholders are urged to consult their own tax
advisors to determine the particular United States federal, state, local and
foreign tax consequences of sales made by them pursuant to the Offer, the
application of the constructive ownership rules mentioned below and the effect
of tax legislative proposals.
As used herein, the term "U.S. Holder" means a beneficial owner of Shares
that is (i) a citizen or resident of the United States, (ii) a corporation or
other entity taxable as a corporation created or organized under the laws of the
United States or any of its political subdivisions, (iii) a trust if a U.S.
court is able to exercise primary supervision over the administration of the
trust and one or more U.S. persons have the authority to control all substantial
decisions of the trust, or (iv) an estate that is subject to U.S. federal income
tax on its income regardless of its source. "Non-U.S. Holder" means a beneficial
owner of Shares that is not a United States person for United States federal
income tax purposes.
Characterization of the Sale. A sale of Shares by a stockholder of the
Company pursuant to the Offer will be a taxable transaction for United States
federal income tax purposes and may also be a taxable transaction under
applicable state, local and foreign tax laws. Under Section 302 of the Code, a
sale of Shares by a stockholder to the Company pursuant to the Offer will be
treated as a "sale or exchange" of such Shares for United States federal income
tax purposes (rather than as a distribution by the Company with respect to the
Shares held by the tendering stockholder) if the receipt of cash upon such sale
(i) results in a "complete termination" of the stockholder's interest in the
Company or (ii) is "not essentially equivalent to a dividend" with respect to
the stockholder. Under Section 304 of the Code, a sale of Shares by a
stockholder to a wholly-owned U.S. corporate affiliate of the Company pursuant
to the Offer will be treated as a distribution in redemption of the Company's
stock that is subject to the Section 302 Tests. Stockholders are encouraged to
discuss the application of these tests (the "Section 302 Tests") to their own
tax situation with their own tax advisor.
In determining whether either of the Section 302 Tests is satisfied, each
stockholder must take into account not only the Shares and other stock of the
Company which are actually owned by the stockholder, but also Shares and other
stock of the Company which are constructively owned by the stockholder within
the meaning of Section 318 of the Code. Under Section 318 of the Code, a
stockholder may constructively own (i) Shares and other stock of the Company
actually owned, and in some cases constructively owned, by certain related
individuals or entities in which the stockholder has an interest, and, in the
case of stockholders that are entities, by certain individuals or entities that
have an interest in the stockholder, and (ii) Shares and other stock of the
Company which the stockholder has the right to acquire by exercise of an option
or by conversion. Contemporaneous dispositions or acquisitions of Shares or
other stock of the Company by a stockholder or related individuals or entities
may be deemed to be part of a single integrated transaction which will be taken
into account in determining whether either of the Section 302 Tests has been
satisfied.
In addition, the issuance of common stock of the Company to other
stockholders pursuant to the public offering by which this offer to purchase is
being funded may be taken into account in determining whether either of the
Section 302 Tests has been satisfied.
A stockholder that sells all of its Shares and owns no other Company
shares, actually or constructively, generally will satisfy the "complete
termination" test.
A stockholder will satisfy the "not essentially equivalent to a dividend"
test if the reduction in the stockholder's proportionate interest in the Company
resulting from the sale of Shares pursuant to the Offer constitutes a
"meaningful reduction" given the stockholder's particular facts and
circumstances. Even a small reduction in a stockholder's proportionate equity
interest may satisfy this test.
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Although no assurance can be given that either of the Section 302 Tests
will be satisfied as to any particular stockholder, the IRS has taken the
position that a non-pro rata redemption of the stock of a stockholder owning
less than one percent of the stock of a widely held corporation satisfied the
"not essentially equivalent to a dividend" test, resulting in capital gain or
loss treatment for the redeemed stockholder, provided the redeemed stockholder's
proportionate interest in the redeeming corporation decreased. If a stockholder
fails to satisfy either of the Section 302 Tests, the U.S. federal income tax
consequences to the stockholder will be as follows. Any cash received from the
Company for Shares pursuant to the Offer by the stockholder would be treated as
a dividend to the extent of the Company's current and accumulated earnings and
profits (without reduction for the tax basis of the Shares sold pursuant to the
Offer), and any cash received in excess of the Company's earnings and profits
will be treated, first, as a nontaxable return of capital to the extent of the
stockholder's adjusted tax basis for such stockholder's Shares, and, thereafter,
as capital gain, to the extent it exceeds such adjusted tax basis. If a
wholly-owned U.S. corporate affiliate of the Company purchases Shares from a
stockholder pursuant to the Offer, the preceding sentence will be applied by
taking into account the current and accumulated earnings and profits of both the
Company and such affiliate. The basis in the tendering stockholder's Shares will
be reduced (but not below zero) by the amount of cash distributed in excess of
the Company's current and accumulated earnings and profits (or, if the Shares
are purchased by a wholly-owned U.S. corporate affiliate of the Company, the
current and accumulated earnings and profits of both the affiliate and the
Company). Any basis in the tendered Shares remaining after such reduction will
be added to the stockholder's basis in its other stock, if any, in the Company.
If a stockholder satisfies either of the Section 302 Tests and the sale of
the Shares is therefore treated as a "sale or exchange" of such Shares for
United States federal income tax purposes, the stockholder will recognize
capital gain or loss equal to the difference between the amount of cash it
received pursuant to the Offer and the stockholder's adjusted tax basis in the
Shares sold pursuant to the Offer. Any such gain or loss will be long term
capital gain or loss if the Shares have been held for more than one year. A
stockholder's holding period for capital gain purposes for Shares it received as
a distribution will commence the day after the date that the stockholder
received such Shares. Accordingly, if a stockholder satisfies either of the
Section 302 Tests, it will recognize short-term capital gain or loss on the sale
of its Shares pursuant to the Offer to the extent such Shares were received by
it as a distribution not more than one year prior to the sale.
Corporate Stockholder Dividend Treatment. Under current law, if a sale of
Shares by a corporate stockholder is treated as a dividend, the corporate
stockholder may be entitled to claim a dividends-received deduction equal to a
portion of the dividend, subject to applicable limitations. The
dividends-received deduction will not be available to a corporate stockholder
that qualifies for sale or exchange treatment under either of the Section 302
Tests. Any amount received by a corporate stockholder pursuant to the Offer that
is treated as a dividend will likely constitute an "extraordinary dividend"
under the Code. A corporate stockholder receiving an "extraordinary dividend"
would be required to reduce its basis (but not below zero) in its Shares by the
non-taxed portion of the extraordinary dividend (i.e., the portion of the
dividend for which a dividends-received deduction is allowed), and, if such
portion exceeds the stockholder's adjusted tax basis for its Shares, to treat
the excess as gain from the sale of such Shares in the year in which the
"extraordinary dividend" is received.
Non-U.S. Holders. A Non-U.S. Holder will be subject to withholding of
federal tax at a rate of 30 percent on gross payments received pursuant to the
Offer that are treated as dividends for U.S. federal income tax purposes unless
the Company (or applicable withholding agent) determines that a reduced rate of
withholding is applicable pursuant to a tax treaty or that an exemption from
withholding is applicable because such gross payments are effectively connected
with the conduct of a trade or business by the Non-U.S. Holder within the United
States. If gross
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<PAGE> 22
payments received by a Non-U.S. Holder pursuant to the Offer are treated as
dividends for U.S. federal income tax purposes, such deemed dividends will be
subject to tax at the rates and in the manner applicable to U.S. Holders if such
deemed dividends are effectively connected with the conduct of a trade or
business by the Non-U.S. Holder within the United States or, alternatively, if a
tax treaty applies, if such deemed dividends are attributable to a United States
"permanent establishment" maintained by the Non-U.S. Holder. Effectively
connected dividends, or dividends attributable to a United States permanent
establishment, as the case may be, received by a corporate Non-U.S. Holder may
also, under certain circumstances, be subject to an additional "branch profits"
tax.
A Non-U.S. Holder with respect to whom tax has been withheld may be
eligible to obtain a refund of all or a portion of the withheld tax if the
Non-U.S. Holder satisfied one of the Section 302 Tests for sale or exchange
treatment, as described above (see "United States Federal Income Tax
Consequences -- Characterization of the Sale") or is otherwise able to establish
that no tax or a reduced amount of tax was due. Non-U.S. Holders generally will
not be subject to U.S. federal income tax on gain recognized in respect of
payments received pursuant to the Offer if such payments are treated as sale
proceeds under either of the Section 302 Tests unless (i) the gain is
effectively connected with a trade or business conducted by the Non-U.S. Holder
within the United States or, alternatively, if a tax treaty applies,
attributable to a United States "permanent establishment" maintained by the
Non-U.S. Holder (in which cases such gain will be subject to tax at the rates
and in the manner applicable to U.S. Holders and, if the holder is a foreign
corporation, an additional "branch profits tax" may apply), (ii) in the case of
an individual Non-U.S. Holder, such holder is present in the United States for
at least 183 days in the taxable year of the Offer and meets certain other
requirements, or (iii) the Company is or has been during certain periods
preceding the disposition a "U.S. real property holding corporation" for U.S.
federal income tax purposes (which the Company does not believe it is). Non-U.S.
Holders are urged to consult their own tax advisors regarding the application of
United States federal income tax withholding, including eligibility for a
withholding tax reduction or exemption and the refund procedure.
Federal Backup Withholding. To avoid federal income tax backup withholding
equal to 31% of the gross payments made pursuant to the Offer, each stockholder
must notify the Depositary of such stockholder's correct taxpayer identification
number and provide certain other information by properly completing the
substitute Form W-9 included in the letter of transmittal. Non-U.S. Holders may
be required to submit a properly completed Form W-8 BEN, certifying their
non-United States status, in order to avoid backup withholding. Each stockholder
is urged to consult with his or her own tax advisor.
THE OFFER
1. NUMBER OF SHARES; EXPIRATION DATE.
Upon the terms and subject to the conditions described herein and in the
Letter of Transmittal, the Company will purchase any and all of the Shares that
are validly tendered by stockholders on or prior to the Expiration Date (and not
properly withdrawn in accordance with "The Offer -- 3. Withdrawal Rights") at
the Purchase Price. 5:00 p.m., New York City time, on Wednesday, November 29,
2000, or the latest time and date to which the Offer is extended, is referred to
herein as the "Expiration Date." The Offer is not conditioned on any minimum
number of Shares being tendered.
The Offer includes an offer to purchase the PIK Shares. Any tender of
Shares prior to November 1, 2000 will not include the PIK Shares. In order for a
stockholder to tender all of its PIK Shares, such stockholder may either (a)
tender all of its Shares before November 1, 2000 in accordance with the
procedures described in this Offer to Purchase, and then tender the PIK
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Shares issued on November 1, 2000 by complying with those procedures a second
time, or (b) tender all of its Shares after November 1, 2000 in accordance with
the procedures described in this Offer to Purchase.
If (i) the Company increases or decreases the price to be paid for Shares
or increases or decreases the number of Shares being sought and (ii) the Offer
is scheduled to expire at any time earlier than the period ending on the tenth
business day from, and including, the date that notice of such increase or
decrease is first published, sent or given to stockholders in the manner
described in "The Offer -- 6. Extension of Tender Period; Termination;
Amendments," then the Offer will be extended at least until the expiration of
ten business days from the date of publication of such notice.
The Company also expressly reserves the right, in its sole discretion, at
any time or from time to time, to extend the period of time during which the
Offer is open or to amend the Offer by making a public announcement thereof. The
Company also expressly reserves the right, in its sole discretion, to terminate
the Offer if at any time any of the conditions to the Offer are not satisfied.
Any extension or amendment, and any termination other than for nonsatisfaction
of a condition, will require Transocean Sedco Forex's consent. See "The
Offer -- 6. Extension of Tender Period; Termination; Amendments."
For purposes of the Offer, a "business day" means any day other than a
Saturday, Sunday or U.S. federal holiday and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.
Copies of this Offer to Purchase and the Letter of Transmittal are being
mailed to record holders of Shares and will be furnished to brokers, banks and
similar persons whose names, or the names of whose nominees, appear on the
Company's stockholder list or, if applicable, who are listed as participants in
a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
2. PROCEDURE FOR TENDERING SHARES.
PROPER TENDER OF SHARES. To tender Shares validly pursuant to the Offer,
either a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees or, in the
case of a book-entry transfer for which acceptance is being electronically
transmitted through the Automated Tender Offer Program ("ATOP"), an Agent's
Message in lieu of the Letter of Transmittal, and any other documents required
by the Letter of Transmittal, must be received by the Depositary at its address
set forth on the back cover of this Offer to Purchase prior to the Expiration
Date. In addition, either (i) the Shares to be tendered must be delivered
pursuant to the procedures for book-entry transfer described below (and a
confirmation of such delivery received by the Depositary, including an Agent's
Message if the tendering stockholder has not delivered a Letter of Transmittal),
or (ii) certificates for the Shares to be tendered must be received by the
Depositary at such address in each case on or prior to the Expiration Date.
A stockholder who desires to tender Shares but cannot comply with the
procedures for tender on a timely basis or whose certificates for Shares are not
immediately available must comply with the guaranteed delivery procedure
described below. Any beneficial owner of Shares whose Shares are held of record
by a broker, dealer, bank, trust company or nominee must instruct such entity to
tender the Shares on such beneficial owner's behalf. An Instruction Form, which
is included in the Offer materials provided along with this Offer to Purchase,
may be used by a beneficial owner to give such instructions to its nominee.
The term "Agent's Message" means a message, transmitted by the Depository
Trust Company ("DTC" or "Book-Entry Transfer Facility") to and received by the
Depositary and forming a part of a book-entry confirmation, which states that
DTC has received an express
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acknowledgment from the tendering participant, which acknowledgment states that
such participant has received and agrees to be bound by the terms of the Letter
of Transmittal and that the Company may enforce such terms against such
participant.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in the system of the Book-Entry
Transfer Facility may make delivery of Shares by causing the Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account in accordance
with the procedures of the Book-Entry Transfer Facility. Although delivery of
Shares may be effected through book-entry transfer, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees, or an Agent's Message in lieu of the Letter of
Transmittal, and any other required documents, must, in any case, be transmitted
to and received by the Depositary at its address set forth on the back cover of
this Offer to Purchase on or prior to the Expiration Date, or the tendering
holder of Shares must comply with the guaranteed delivery procedure described
below. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS TO
THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEES AND METHOD OF DELIVERY. Signatures on a Letter of
Transmittal need not be guaranteed if (a) the Letter of Transmittal is signed by
the registered holder of the Shares (which term, for purposes of this section,
shall include any participant in the Book-Entry Transfer Facility whose name
appears on a security position listing as the owner of the Shares) tendered
therewith and such holder has not completed the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" in the Letter
of Transmittal or (b) Shares are tendered for the account of a member firm of a
registered national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or trust company (not a savings
bank or a savings and loan association) having an office, branch or agency in
the United States (each such entity being hereinafter referred to as an
"Eligible Institution"). See Instruction 1 of the Letter of Transmittal. In all
other cases, all signatures on the Letter of Transmittal must be guaranteed by
an Eligible Institution. If a certificate for Shares is registered in the name
of a person other than the person executing a Letter of Transmittal, or if
payment is to be made, or Shares not purchased or tendered are to be issued, to
a person other than the registered holder, then the certificate must be endorsed
or accompanied by an appropriate stock power, in either case signed exactly as
the name of the registered holder appears on the certificate, with the
signatures on the certificate or stock power guaranteed by an Eligible
Institution.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of
certificates for such Shares (or a timely confirmation of a book-entry transfer
of such Shares into the Depositary's account at the Book-Entry Transfer Facility
as described above), a properly completed and duly executed Letter of
Transmittal (or, in the case of a book-entry transfer, an Agent's Message) and
any other documents required by the Letter of Transmittal.
GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to
the Offer and cannot deliver certificates for such Shares and all other required
documents to the Depositary on or prior to the Expiration Date or the procedure
for book-entry transfer cannot be complied with in a timely manner, such Shares
may nevertheless be tendered if all of the following conditions are met:
(a) such tender is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Company (with any
required signature guarantees) is received by the Depositary as provided
below on or prior to the Expiration Date; and
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(c) the certificates for such Shares (or a confirmation of a
book-entry transfer of such Shares into the Depositary's account at the
Book-Entry Transfer Facility), a properly completed and duly executed
Letter of Transmittal (or photocopy thereof) together with any required
signature guarantees and any other documents required by the Letter of
Transmittal, are received by the Depositary no later than 5:00 p.m., New
York City time, on the third business day after the date of execution of
the Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile transmission or mail to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in such Notice.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY.
FEDERAL BACKUP WITHHOLDING. TO AVOID FEDERAL INCOME TAX BACKUP WITHHOLDING
EQUAL TO 31% OF THE GROSS PAYMENTS MADE PURSUANT TO THE OFFER, EACH STOCKHOLDER
MUST NOTIFY THE DEPOSITARY OF SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION
NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY PROPERLY COMPLETING THE
SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL. NON-CORPORATE FOREIGN
STOCKHOLDERS MAY BE REQUIRED TO SUBMIT A PROPERLY COMPLETED FORM W-8, CERTIFYING
NON-UNITED STATES STATUS, IN ORDER TO AVOID BACKUP WITHHOLDING. IN ADDITION,
FOREIGN STOCKHOLDERS MAY BE SUBJECT TO 30% (OR LOWER TREATY RATE) WITHHOLDING ON
GROSS PAYMENTS RECEIVED PURSUANT TO THE OFFER. EACH STOCKHOLDER IS URGED TO
CONSULT WITH HIS OR HER OWN TAX ADVISOR.
DETERMINATIONS OF VALIDITY. All questions as to the number of Shares to be
accepted, the Purchase Price, the form of documents and the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Company, in its sole discretion, and its
determination shall be final and binding. The Company reserves the absolute
right to reject any or all tenders of Shares that it determines are not in
proper form or the acceptance for payment of, or payment for, Shares that may be
unlawful. The Company also reserves the absolute right to waive any of the
conditions of the Offer or any defect or irregularity with respect to any tender
of Shares or any particular stockholder. No tender of Shares will be deemed to
have been properly made until all defects or irregularities have been cured by
the tendering stockholder or waived by the Company. None of the Company, the
Depositary or any other person will be under any duty to give notice of any
defect or irregularity in tenders, nor shall any of them incur any liability for
failure to give any such notice.
ABSENCE OF APPRAISAL RIGHTS. Holders of the Shares do not have any
appraisal or dissenters' rights under the Delaware General Corporation Law in
connection with the Offer. The Company intends to conduct the Offer in
accordance with applicable law.
3. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to 5:00 p.m., New York City
time, on the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn after December 26, 2000, unless previously accepted
for payment as provided in this Offer to Purchase. If the Company extends the
period of time during which the Offer is open, is delayed in accepting for
payment or paying for Shares or is unable to accept for payment or pay for
Shares pursuant to the Offer for any reason, then, without prejudice to the
Company's rights under the Offer, the
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Depositary may, on behalf of the Company, retain all Shares tendered, and such
Shares may not be withdrawn except as otherwise provided in this section,
subject to Rule 13e-4(f)(5) under the Exchange Act, which provides that the
issuer making the tender offer shall either pay the consideration offered, or
return the tendered securities promptly after the termination or withdrawal of
the tender offer.
To be effective, a notice of withdrawal must be in written or facsimile
transmission form and must be timely received by the Depositary at its address
set forth on the back cover of this Offer to Purchase and must specify the name
of the person who tendered the Shares to be withdrawn, the name of the
registered holder (if different from that of the person who tendered such
Shares), the number of Shares tendered and the number of Shares to be withdrawn.
If the Shares to be withdrawn have been delivered to the Depositary, the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution (except in the case of Shares tendered by an Eligible Institution)
prior to the release of such Shares. In addition, such notice must also specify,
in the case of Shares tendered by delivery of certificates, the serial numbers
shown on the particular certificates evidencing the Shares to be withdrawn or,
in the case of Shares tendered by book-entry transfer, the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares. Stockholders who tendered Shares through a broker or bank
should provide instructions to the broker or bank to arrange for a withdrawal.
Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed
not validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered by again following one of the procedures described in "The
Offer -- 2. Procedure for Tendering Shares" at any time prior to the Expiration
Date.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by the Company, in its sole
discretion, which determination shall be final and binding. None of the Company,
the Depositary, or any other person will be under any duty to give notification
of any defect or irregularity in any notice of withdrawal or incur any liability
for failure to give any such notification.
4. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer and as promptly
as practicable after the Expiration Date, the Company will accept for payment
and will pay the Purchase Price for any and all Shares validly tendered and not
properly withdrawn in accordance with "The Offer -- 3. Withdrawal Rights."
Thereafter, payment for all Shares accepted for payment pursuant to the Offer
will be made by the Depositary by check as promptly as practicable. In all
cases, payment for Shares accepted for payment pursuant to the Offer will be
made only after timely receipt by the Depositary of certificates for Shares (or
of a confirmation of a book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility), a properly completed and duly
executed Letter of Transmittal or photocopy thereof, and any other required
documents.
For purposes of the Offer, the Company will be deemed to have accepted for
payment (and thereby purchased) Shares that are validly tendered prior to the
applicable Expiration Date and not withdrawn only when, as and if it gives oral
or written notice to the Depositary of its acceptance for payment of such
Shares. The Company will pay for Shares that it has purchased pursuant to the
Offer by depositing the Purchase Price therefor with the Depositary. The
Depositary will act as agent for tendering stockholders for the purpose of
receiving payment from the Company and transmitting payment to tendering
stockholders. Under no circumstances will interest be paid on amounts to be paid
to tendering stockholders, regardless of any delay in making such payment. The
Company's acceptance for payment of Shares tendered pursuant to the Offer will
constitute a binding agreement between the tendering stockholder and the Company
upon the terms and subject to the conditions of the Offer.
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The Company reserves the right, in its sole discretion, to delay acceptance
for payment of, or payment for, Shares. If the Company is delayed in its
acceptance for payment of, or payment for, Shares or is unable to accept for
payment, or pay for, Shares pursuant to the Offer for any reason, then, without
prejudice to the Company's rights under the Offer (subject to compliance with
Rule 14e-1(c) under the Exchange Act), the Depositary may, nevertheless, on
behalf of the Company, retain tendered Shares, and such Shares may not be
withdrawn except to the extent tendering stockholders are entitled to exercise,
and duly exercise, withdrawal rights as described in "The Offer -- 3. Withdrawal
Rights."
If the Company does not purchase Shares pursuant to the Offer for any
reason, certificates for all Shares not purchased will be returned (or, in the
case of Shares tendered by book-entry transfer, such Shares will be credited to
an account maintained with the Book-Entry Transfer Facility) as promptly as
practicable without expense to the tendering stockholder.
The Company will pay or cause to be paid any stock transfer taxes with
respect to the sale and transfer of any Shares to it or its order pursuant to
the Offer. If, however, payment of the Purchase Price is to be made to, or
Shares not tendered or not purchased are to be registered in the name of, any
person other than the registered holder, or if tendered Shares are registered in
the name of any person other than the person signing the Letter of Transmittal,
the amount of any stock transfer taxes (whether imposed on the registered
holder, such other person or otherwise) payable on account of the transfer to
such person will be deducted from the Purchase Price unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is submitted. See
Instruction 6 of the Letter of Transmittal.
The Company may be required to withhold and remit to the IRS 31% of the
gross proceeds paid to any tendering stockholder or other payee who fails to
complete fully, sign and return to the Depositary the Substitute Form W-9
included in the Letter of Transmittal. See "Special Factors -- 6. United States
Federal Income Tax Consequences."
The Company reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates, the right to purchase all or
any portion of the Shares tendered in the Offer, but any such transfer or
assignment will not relieve the Company of its obligations under the Offer and
will in no way prejudice the right of tendering holders to receive payment for
Shares validly tendered and accepted for payment pursuant to the Offer.
5. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, the Company will not be
required to accept for payment, purchase or pay for any Shares tendered, and may
terminate or amend the Offer or may postpone (subject to the requirements of the
Exchange Act for prompt payment for or return of Shares) the acceptance for
payment of, or the purchase of and payment for Shares tendered, if at any time
on or after October 27, 2000, any of the following events shall have occurred
(or shall have been determined by the Company in its sole judgment to have
occurred) regardless of the circumstances giving rise thereto (including any
action or omission to act by the Company) and, in the sole judgment of the
Company, such event or events make it undesirable or inadvisable to proceed with
the Offer or with such acceptance for payment or payment:
(a) the failure to complete a public offering of the common stock of
the Company generating net proceeds of at least $399.7 million to be used
to finance at least a portion of the consideration for the Offer;
(b) the withdrawal of the consent of Transocean Sedco Forex to the
Offer, which withdrawal may be made in its sole discretion;
(c) there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency or authority or tribunal
18
<PAGE> 28
or there shall be pending any action or proceeding by any other person,
domestic or foreign, or before any court, authority, agency or tribunal
that (i) challenges or seeks to challenge the acquisition of Shares
pursuant to the Offer or otherwise in any manner relates to or affects the
Offer or (ii) in the reasonable judgment of the Company, could materially
and adversely affect the business, condition (financial or other), income,
operations or prospects of the Company, or otherwise materially impair in
any way the contemplated future conduct of the business of the Company or
materially impair the contemplated benefits of the Offer to the Company; or
(d) there shall have been any action threatened, pending or taken, or
approval withheld, withdrawn or abrogated or any statute, rule, regulation,
judgment, order or injunction threatened, proposed, sought, promulgated,
enacted, entered, amended, enforced or deemed to be applicable to the Offer
or the Company, by any legislative body, court, authority, agency or
tribunal which, in the Company's reasonable judgment, would or might
directly or indirectly (i) make the acceptance for payment of, or payment
for, some or all of the Shares illegal or otherwise restrict or prohibit
consummation of the Offer, (ii) delay or restrict the ability of the
Company, or render the Company unable, to accept for payment or pay for
some or all of the Shares, (iii) impose or seek to impose limitations on
the ability of the Company to acquire or hold or to exercise full rights of
ownership of the Shares, (iv) materially impair the contemplated benefits
of the Offer to the Company or (v) materially affect the business,
condition (financial or other), income, operations or prospects of the
Company, or otherwise materially impair in any way the contemplated future
conduct of the business of the Company.
On October 26, 2000, the Company agreed to sell 16,300,000 shares of its
common stock in the Common Stock Offering, which is expected to generate
$399,700,000 of net proceeds. All of those proceeds will be needed and used to
fund the purchase of Shares tendered in the Offer, assuming all outstanding
Shares are tendered. The Company expects the Common Stock Offering to close on
or about October 31, 2000, and expects to announce that the condition in
subparagraph (a) above has been satisfied shortly after the closing of the
Common Stock Offering.
Any of the foregoing conditions may be waived, subject to the approval of
Transocean Sedco Forex, by the Company, in whole or in part, at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time. Any determination by the Company concerning
the events described above will be final and binding on all parties.
6. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS.
Subject to the consent of Transocean Sedco Forex, the Company expressly
reserves the right, in its sole discretion and at any time or from time to time,
regardless of whether any of the conditions set forth in "The Offer -- 5.
Certain Conditions of the Offer" shall not have been satisfied or shall be
deemed by the Company to not have been satisfied, to extend the period of time
during which the Offer is open and thereby delay acceptance for payment of, and
payment for, any Shares. During any such extension, all Shares previously
tendered will remain subject to the Offer, except to the extent that such Shares
may be withdrawn as set forth in "The Offer -- 3. Withdrawal Rights." The
Company also expressly reserves the right, in its sole discretion if any of the
conditions set forth in "The Offer -- 5. Certain Conditions of the Offer" shall
not have been satisfied or shall be deemed by the Company to not have been
satisfied, (a) to terminate the Offer and not accept for payment or pay for any
Shares not previously accepted for payment or paid for or (b) to postpone
purchase of or payment for Shares. The Company's reservation of the right to
delay payment for Shares which it has accepted for payment is limited by
19
<PAGE> 29
Rule 13e-4(f)(5) and Rule 14e-1(c) under the Exchange Act, which require that
the Company must pay the consideration offered or return the Shares tendered
promptly after termination or withdrawal of a tender offer.
Subject to compliance with applicable law and to the consent of Transocean
Sedco Forex, the Company further reserves the right, in its sole discretion, and
regardless of whether any of the events set forth in "The Offer -- 5. Certain
Conditions of the Offer" shall have occurred or shall be deemed by the Company
to have occurred, to amend the Offer in any respect. Amendments to the Offer may
be made at any time and from time to time. Any extension, amendment or
termination of the Offer will be followed as promptly as practicable by public
announcement thereof, the announcement in the case of an extension to be issued
no later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. Material changes to information previously
provided to holders of the Shares in this Offer or in documents furnished
subsequent thereto will be disseminated to holders of Shares in compliance with
Rule 13e-4(e)(3) under the Exchange Act.
If the Company materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by Rule 14e-1 under the
Exchange Act, which requires the Offer to continue or be extended for at least
ten business days from the time the Company publishes, sends or gives to holders
of Shares a notice that it will (a) increase or decrease the price it will pay
for Shares or (b) increase or decrease the number of Shares it seeks.
7. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are currently listed on the NYSE under the symbol "FLC NA09."
The Shares were first listed on the NYSE on October 13, 2000. From that date to
the date immediately prior to the date of this Offer to Purchase, no trades have
been reported by the NYSE. Prior to October 13, 2000, there was no established
public reporting or trading system for the Shares. STOCKHOLDERS ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES, IF AVAILABLE, BEFORE DECIDING
TO TENDER.
Dividends on the Shares are payable in cash or, on or before May 1, 2004,
at the Company's option, in additional shares of preferred stock, on each
February 1, May 1, August 1 and November 1. Dividends on the Shares accrue at
the rate of 13 7/8% of the liquidation preference per annum and are cumulative
from the date on which the preferred stock was originally issued. Covenants
contained in the indentures governing a substantial portion of the Company's
indebtedness limit its ability to pay cash dividends. Upon consummation of the
Merger, these covenants are expected to be suspended and the Company expects to
pay dividends after the Merger in cash. If the Merger is not consummated, the
Company intends to pay dividends on the Shares in additional shares of preferred
stock for most or all of the period ending May 1, 2004, unless industry
conditions improve significantly.
As of October 26, 2000, the Company had timely paid all dividends on each
payment date since the date the Shares were issued in the form of approximately
0.03469 additional Shares for each Share then outstanding. The Company
anticipates that it will satisfy the dividend payment due on November 1, 2000 to
holders of record as of October 15, 2000 through the issuance of 12,382.085
additional Shares.
8. CERTAIN INFORMATION CONCERNING THE COMPANY AND THE SHARES.
GENERAL. The Company was incorporated under the laws of the State of
Delaware. The Company's primary business is providing marine contract drilling
and ancillary services on a worldwide basis. The Company provides the equipment
and personnel for drilling wells and conducting workover operations on wells in
marine environments and on land.
20
<PAGE> 30
The Company also owns and operates towing vessels and barges used to
transport and store equipment and material to support drilling operations. These
assets are deployed primarily in the jack-up and barge rig businesses. The
Company also provides, to a minor extent, such equipment for ocean
transportation of materials and in connection with marine construction projects.
In accordance with the terms of the Merger Agreement and at the request of
Transocean Sedco Forex, the Company has started taking steps to dispose of these
towing vessels and barges.
SUMMARY FINANCIAL INFORMATION. The audited financial statements for the
Company for the fiscal years ended December 31, 1999 and December 31, 1998 are
incorporated herein by reference from the Company reports on Form 10-K for those
years. The unaudited financial statements for the six months ended June 30, 2000
and 1999 are incorporated herein by reference from the Company reports on Form
10-Q for those periods. These reports may be inspected and copies may be
obtained from the Commission in the manner set forth in "The Offer -- 14. Where
You Can Find More Information About the Company and the Offer."
The following tables set forth the Company's selected historical
consolidated financial data as of and for the six months ended June 30, 2000 and
1999 and as of and for each of the years in the three-year period ended December
31, 1999, giving effect to the merger of Reading & Bates Corporation and Falcon
Drilling Company, Inc. under the "pooling-of-interests" method of accounting.
The selected historical consolidated financial data as of and for the six months
ended June 30, 2000 and 1999 have been derived from the Company's unaudited
condensed consolidated financial statements. The summary consolidated financial
data as of and for the three-year period ended December 31, 1999 have been
derived from the Company's audited consolidated financial statements. The
following data should be read in conjunction with the Company's historical
consolidated financial statements incorporated herein by reference.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues..................... $ 933.0 $1,032.6 $ 918.8 $ 470.3 $ 419.4
Operating income....................... 160.4 215.8 45.1 41.8 1.2
Income (loss) from continuing
operations before extraordinary
item................................. 29.8 91.0 (67.8) (10.9) (68.4)
Net income (loss) applicable to commons
stockholders......................... (6.2) 102.8 (103.2) (21.7) (94.6)
Net income (loss) per common share:
Basic................................ $ (0.04) $ 0.61 $ (0.54) $ (0.11) $ (0.49)
Fully Diluted........................ (0.04) 0.61 (0.54) (0.11) (0.49)
Weighted average common shares
outstanding:
Basic................................ 164.1 167.5 192.7 192.5 193.2
Fully Diluted........................ 166.2 168.8 192.7 192.5 193.2
BALANCE SHEET DATA (END OF PERIOD):
Working capital........................ $ (12.0) $ 185.3 $ 514.3 $ 711.6 $ 359.8
Total assets........................... 2,011.4 3,714.0 4,921.9 4,712.1 4,748.3
Total debt (including current portion)
and redeemable stocks................ 827.4 1,872.5 3,229.5 2,959.1 3,252.2
Stockholders' equity................... 728.0 1,250.2 1,204.4 1,282.6 1,122.1
</TABLE>
21
<PAGE> 31
UNAUDITED PRO FORMA FINANCIAL INFORMATION.
BACKGROUND
On December 31, 1997, Reading & Bates Corporation and Falcon Drilling
Company combined to form R&B Falcon Corporation. The combination was accounted
for as a pooling of interests. On December 1, 1998, the Company acquired all of
the outstanding shares of Cliffs Drilling Company. The acquisition was accounted
for using the purchase method of accounting.
SOURCE OF INFORMATION
The Company is providing the following selected financial information
concerning the Company to help you in your analysis of the financial aspects of
the offering. We derived this information from the audited and unaudited
financial statements of the Company for the periods presented. The information
is only a summary, and you should read it in conjunction with the financial
information incorporated by reference in this document.
HOW WE PREPARED THE UNAUDITED PRO FORMA FINANCIAL INFORMATION
The balance sheet data assumes the consummation of Common Stock Offering
and the repurchase in the Offer of all of the Shares was completed on June 30,
2000, and the operating results data assumes the consummation of the Common
Stock Offering and the repurchase in this Offer was completed on January 1,
1999. Depending upon the results of this Offer and, if necessary, the Equity
Clawback, the reduction in the outstanding Shares, cash and cash equivalents and
net loss per share, reflected in the unaudited pro forma financial information,
could be less.
If the Common Stock Offering and this Offer had been completed on the dates
assumed in the pro forma financial statements, the Company might have performed
differently. You should not rely on the pro forma financial information as an
indication of the financial position or results of operations that the Company
would have achieved had the Common Stock Offering and this Offer taken place
earlier or of the future results that the Company will achieve after the Common
Stock Offering and this Offer.
22
<PAGE> 32
R&B FALCON CORPORATION
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2000
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C>
Cash and cash equivalents................................ $ 294.8 $ (58.5)(a) $ 236.3
Accounts receivable...................................... 192.0 192.0
Other current assets..................................... 168.9 168.9
-------- ------- --------
Total current assets........................... 655.7 (58.5) 597.2
Property and equipment, net.............................. 3,748.4 3,748.4
Goodwill, net............................................ 86.7 86.7
Other assets............................................. 257.5 257.5
-------- ------- --------
Total assets................................... $4,748.3 $ (58.5) $4,689.8
======== ======= ========
Current liabilities...................................... $ 295.9 $ -- $ 295.9
Long-term obligations.................................... 2,910.3 2,910.3
Deferred taxes and other credits......................... 59.8 59.8
Minority interest........................................ 58.2 58.2
Redeemable preferred shares.............................. 302.0 (302.0)(b) --
Shareholders' equity..................................... 1,122.1 243.5(c) 1,365.6
-------- ------- --------
Total liabilities and shareholders' equity..... $4,748.3 $ (58.5) $4,689.8
======== ======= ========
</TABLE>
See notes to the R&B Falcon Corporation unaudited condensed
pro forma consolidated financial statements.
23
<PAGE> 33
R&B FALCON CORPORATION
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------ ----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Operating revenues..................................... $419.4 $ -- $ 419.4
Cost and expenses
Operating and maintenance............................ 299.3 299.3
Depreciation and amortization........................ 89.2 89.2
General and administrative........................... 29.7 29.7
------ ------ -------
Total costs and expenses..................... 418.2 -- 418.2
------ ------ -------
Operating income....................................... 1.2 -- 1.2
Other income(expense), net............................. (94.2) (94.2)
------ ------ -------
Loss before income tax benefit and minority interest... (93.0) -- (93.0)
Income tax benefit..................................... (27.9) (27.9)
Minority interest...................................... (3.3) (3.3)
------ ------ -------
Net loss............................................... (68.4) -- (68.4)
Dividends and accretion on preferred shares............ 26.2 (26.2)(b) --
------ ------ -------
Net loss applicable to common shareholders............. $(94.6) $ 26.2 $ (68.4)
====== ====== =======
Net loss per share:
Basic................................................ $ (.49) $ (.33)
====== =======
Diluted.............................................. $ (.49) $ (.33)
====== =======
Weighted average shares outstanding:
Basic................................................ 193.2 16.3(d) 209.5
====== ====== =======
Diluted.............................................. 193.2 16.3(d) 209.5
====== ====== =======
</TABLE>
See notes to the R&B Falcon Corporation unaudited condensed
pro forma consolidated financial statements.
24
<PAGE> 34
R&B FALCON CORPORATION
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------ ----------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Operating revenues........................................ $ 918.8 $ -- $ 918.8
Cost and expenses
Operating and maintenance............................... 645.8 645.8
Depreciation and amortization........................... 158.0 158.0
General and administrative.............................. 69.9 69.9
------- ------ -------
Total costs and expenses........................ 873.7 -- 873.7
------- ------ -------
Operating income.......................................... 45.1 -- 45.1
Other income (expense), net............................... (132.2) (132.2)
------- ------ -------
Loss before income taxes, minority interest and
extraordinary loss...................................... (87.1) -- (87.1)
Income tax benefit........................................ (31.6) (31.6)
Minority interest......................................... (12.3) (12.3)
------- ------ -------
Loss before extraordinary loss............................ (67.8) -- (67.8)
Extraordinary loss........................................ (1.7) -- (1.7)
------- ------ -------
Net loss.................................................. (69.5) -- (69.5)
Dividends and accretion on preferred shares............... 33.7 (33.7)(b) --
------- ------ -------
Net loss applicable to common shareholders................ $(103.2) $ 33.7 $ (69.5)
======= ====== =======
Net loss per share:
Basic:
Loss before extraordinary loss and after preferred
share dividends.................................... $ (.53) $ (.32)
Extraordinary loss................................... (.01) (.01)
------- -------
Net loss........................................... $ (.54) $ (.33)
======= =======
Diluted:
Loss before extraordinary loss and after preferred
stock dividends.................................... $ (.53) $ (.32)
Extraordinary loss................................... (.01) (.01)
------- -------
Net loss........................................... $ (.54) $ (.33)
======= =======
Weighted average shares outstanding:
Basic................................................... 192.7 16.3(d) 209.0
======= ====== =======
Diluted................................................. 192.7 16.3(d) 209.0
======= ====== =======
</TABLE>
See notes to the R&B Falcon Corporation unaudited condensed
pro forma consolidated financial statements.
25
<PAGE> 35
R&B FALCON CORPORATION
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(a) Represents the amount of cash on hand used to pay the purchase price in the
Offer for the preferred stock. All of the net proceeds from the Common
Stock Offering were used to pay the purchase price in the Offer for the
preferred stock.
(b) Represents the repurchase of 100% of the preferred stock pursuant to the
Offer for all of the preferred stock.
(c) Represents the issuance of common stock as a result of the Common Stock
Offering at an offering price of $24.75 per share, net of underwriter
discount and estimated offering and tender offer costs of $5.5 million, and
the estimated premium to be paid of $103.5 million, based on 130% of the
$345.0 million face value of the redeemable preferred stock outstanding at
June 30, 2000 and $50.9 million expense for the unamortized accretion as a
result of the repurchase of 100% of the preferred stock pursuant to the
Offer for the preferred stock.
(d) Represents the issuance of common stock as a result of the Common Stock
Offering.
RATIO OF EARNINGS TO FIXED CHARGES AND TO COMBINED FIXED CHARGES
AND PREFERRED DIVIDENDS
Ratio of earnings to fixed charges
For the six months ended June 30, 2000, earnings did not cover fixed
charges by $128.6 million.
Ratio of earnings to combined fixed charges and preferred dividends
For the six months ended June 30, 2000, earnings did not cover fixed
charges by $166.0 million.
PRO FORMA RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED DIVIDENDS
The following pro forma information assumes the consummation of the Common
Stock Offering and the repurchase in the Offer of all of our 13 7/8% Senior
Cumulative Redeemable Preferred Stock was completed on January 1, 1999. For the
six months ended June 30, 2000, earnings did not cover fixed charges by $128.6
million. For the year ended December 31, 1999, earnings did not cover fixed
charges by $161.2 million.
DESCRIPTION OF THE SHARES. The following is a brief description of the
Shares:
DIVIDENDS.................. Dividends on the Shares are payable in cash or, on
or before May 1, 2004, at our option, in additional
shares of preferred stock, on each February 1, May
1, August 1 and November 1. Dividends on the Shares
accrue at the rate of 13 7/8% of the liquidation
preference per annum and are cumulative from the
date on which the preferred stock was originally
issued. Dividend policy with respect to the Shares
is described in "The Offer -- 7. Price Range of
Shares; Dividends."
AMOUNT PAYABLE UPON
LIQUIDATION.............. $1,000 per share, plus accrued and unpaid
dividends.
VOTING..................... Holders of the Shares have no voting rights except
as provided by law and as provided in the
Certificate of Designation. In the event that
dividends are not paid for any three quarters,
whether
26
<PAGE> 36
or not consecutive, or upon certain other events
(including the failure to make a Change of Control
Offer (as defined below), to comply with certain
other covenants or to pay the mandatory redemption
price when due), then the number of directors that
make up the Board of Directors of the Company will
be increased to permit the holders of the majority
of the then outstanding Shares, voting separately
as a class with any other class of securities
having similar voting rights, to elect two
directors. Under the Merger Agreement, the Company
will amend its certificate of incorporation
immediately before the effective time of the Merger
to grant each Share 0.1787 votes in the election of
directors of the Company voting together with the
common stockholders. The Company anticipates that
Transocean Holdings Inc., through its ownership of
all of the outstanding shares of the Company's
common stock after the Merger, will have the
ability to elect all of the Company's directors.
MANDATORY REDEMPTION....... The Company must redeem the preferred stock on May
1, 2009 (subject to the legal availability of
funds) at a redemption price equal to the
liquidation preference, plus accrued and unpaid
dividends to the redemption date.
OPTIONAL REDEMPTION........ The Company may redeem any of the preferred stock
beginning May 1, 2004. The initial redemption price
is 106.938% of the liquidation preference,
declining thereafter to 100.000% on or after May 1,
2007, in each case plus accrued and unpaid
dividends to the redemption date.
In addition, at any time on or prior to May 1,
2002, the Company may exercise the Equity Clawback.
The Company may exercise the Equity Clawback only
within 45 days after completion of an equity
offering. It is a condition to the Merger that the
Company exercise the Equity Clawback.
OPTIONAL EXCHANGE
FEATURE.................... The preferred stock will become exchangeable in
whole, but not in part, into subordinated
debentures at the Company's option if the
conditions described in the Certificate of
Designation are satisfied. Indentures governing a
substantial portion of the Company's indebtedness
currently restrict the Company's ability to
consummate such an exchange. Upon consummation of
the Merger, these covenants are expected to be
suspended, thereby eliminating the restrictions on
the Company's ability to consummate such an
exchange.
CHANGE OF CONTROL.......... Upon a Change of Control (as defined in the
Certificate of Designation), the Company generally
will be required to make an offer to purchase all
outstanding preferred stock. The purchase price
will equal 101% of the liquidation preference of
the preferred stock, plus accrued and unpaid
dividends. The Company anticipates that Transocean
Sedco Forex will not be required to make a change
of control offer on these terms upon consummation
of the Merger because of an exception to this
requirement in the Certificate of Designation.
27
<PAGE> 37
9. SOURCE AND AMOUNT OF FUNDS.
Assuming that the Company purchases all Shares tendered by stockholders,
the total amount required by the Company to purchase such Shares will be
approximately $482.6 million, including fees and other expenses.
On October 26, 2000, the Company entered into an underwriting agreement to
sell 16,300,000 shares of its common stock in a public offering that is expected
to generate net proceeds of $399,700,000 (the "Common Stock Offering"). The
Company expects the Common Stock Offering to close on or about October 31, 2000.
If all of the outstanding Shares are tendered in the Offer and the Company
accepts them for purchase, the Company will use all of the net proceeds from the
Common Stock Offering to fund a portion of the Offer consideration, and certain
of its subsidiaries will use a portion of their existing cash to fund any Offer
consideration in excess of the net proceeds of the Common Stock Offering. If
less than all of the outstanding Shares are tendered in the Offer, the Company
intends to use up to $119,568,750 of the net proceeds of the Common Stock
Offering to redeem up to 105,000 Shares at a redemption price equal to $1,138.75
per share, plus accrued and unpaid dividends as of the date of the redemption,
under the terms of the Certificate of Designation. In order to use any of the
proceeds from the Common Stock Offering to redeem Shares under this provision of
the Certificate of Designation, the Company must redeem the Shares within 45
days of the date of the closing of the Common Stock Offering.
10. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; TERMINATION OF REGISTRATION
UNDER THE EXCHANGE ACT.
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise be traded publicly and will reduce the
number of holders of Shares. In addition, it is possible that either the Company
or, after the Merger, Transocean Sedco Forex, could delist the Shares on the New
York Stock Exchange and could deregister the Shares under the Exchange Act, as
amended. As a result, the liquidity of the Shares and the ability of a holder of
the Shares to get accurate market quotations for the Shares could be
significantly reduced as a result of the Offer.
11. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
The Company is not aware of any license or regulatory permit that appears
to be material to its business that might be adversely affected by its
acquisition of Shares as contemplated in the Offer or of any approval or other
action by any government or governmental, administrative or regulatory authority
or agency, domestic or foreign, that would be required for the Company's
acquisition or ownership of Shares pursuant to the Offer. Should any such
approval or other action be required, the Company currently contemplates that it
will seek such approval or other action. The Company cannot predict whether it
may determine that it is required to delay the acceptance for payment of, or
payment for, Shares tendered pursuant to the Offer pending the outcome of any
such matter. There can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial conditions
or that the failure to obtain any such approval or other action might not result
in adverse consequences to the Company's business. The Company intends to make
all required filings under the Exchange Act. The Company's obligation under the
Offer to accept for payment, or make payment for, Shares is subject to certain
conditions. See "The Offer -- 5. Certain Conditions of the Offer."
12. FEES AND EXPENSES; PERSONS RETAINED AND COMPENSATED.
DEALER MANAGER. Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated
are acting as the Dealer Managers for the Company in connection with the Offer.
Goldman, Sachs acted as underwriter in the Common Stock Offering. Morgan Stanley
has also provided a fairness opinion
28
<PAGE> 38
in connection with the Offer and certain financial advisory services to the
Company in connection with the Merger. The Company will pay the Dealer Managers'
reasonable and customary compensation for such services, plus reimbursement for
reasonable out-of-pocket expenses. The Company has agreed to indemnify the
Dealer Managers and financial advisor against certain liabilities in connection
with the Offer, including with respect to any liabilities under federal
securities laws. At any time, the Dealer Managers may trade the Shares for their
own accounts or for the accounts of customers and, accordingly, may hold long or
short positions in the Shares. All inquiries and correspondence addressed to the
Dealer Managers relating to the Offer should be directed to their respective
addresses or telephone numbers set forth on the back cover of this Offer to
Purchase.
The Dealer Managers and their affiliates have in the past provided banking
and investment banking services to the Company for which they have received
customary compensation. From time to time, the Dealer Managers and their
respective affiliates may provide other services to the Company and its
affiliates.
DEPOSITARY. The Depositary for the Offer is American Stock Transfer & Trust
Company. All deliveries, correspondence and questions sent or presented to the
Depositary relating to the Offer should be directed to the address or telephone
number set forth on the back cover of this Statement. The Company will pay the
Depositary reasonable and customary compensation for its services in connection
with the Offer, plus reimbursement for reasonable out-of-pocket expenses. The
Company will indemnify the Depositary against certain liabilities and expenses
in connection therewith, including liabilities under the federal securities
laws.
INFORMATION AGENT. Georgeson Shareholder Communications Inc. is acting as
the Information Agent for the Company in connection with the Offer. The Company
will pay the Information Agent reasonable and customary compensation for such
services, plus reimbursement for reasonable out-of-pocket expenses. All
inquiries and correspondence addressed to the Information Agent relating to the
Offer should be directed to the address or telephone number set forth on the
back cover of this Offer to Purchase.
Brokers, dealers, commercial banks and trust companies will be reimbursed
by the Company for customary mailing and handling expenses incurred by them in
forwarding material to their customers. The Company will not pay any fees or
commissions to any broker, dealer or other person (other than the Dealer
Manager) in connection with the solicitation of tenders of Shares pursuant to
the Offer.
None of the Dealer Managers, the Information Agent or the Depositary assume
any responsibility for the accuracy or completeness of the information
concerning the Company or their respective affiliates contained in this Offer to
Purchase or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of such information.
The Company has retained Morgan Stanley to provide an opinion on the
fairness of the consideration to be received by holders of the Shares pursuant
to the Offer from a financial point of view. The Company has agreed to pay
Morgan Stanley a fee of $750,000 plus reasonable out-of-pocket expenses for
these services.
Certain directors or executive officers of the Company may, from time to
time, contact stockholders to provide them with information regarding the Offer.
Such directors and executive officers will not make any recommendation to any
stockholder as to whether to tender all or any Shares and will not solicit the
tender of any Shares. The Company will not compensate any director or executive
officer for these services.
The Company will pay all stock transfer taxes, if any, payable on account
of the acquisition of the Shares by the Company pursuant to the Offer, except in
certain circumstances where
29
<PAGE> 39
special payment or delivery procedures are utilized pursuant to Instruction 6 of
the Letter of Transmittal or where brokers charge fees to beneficial owners for
whom they hold Shares.
Fees and expenses to be incurred by the Company in connection with the
Offer, are estimated as follows:
<TABLE>
<S> <C>
Dealer Manager Fees......................................... 1,385,000
Financial Advisory Fees..................................... 750,000
Accounting Fees............................................. 50,000
Legal Fees.................................................. 100,000
Printing.................................................... 75,000
Filing Fees................................................. 96,030
Miscellaneous............................................... 43,970
----------
Total............................................. 2,500,000
==========
</TABLE>
13. WHERE YOU CAN FIND MORE INFORMATION ABOUT THE COMPANY AND THE OFFER.
Pursuant to Rule 13e-3 and Rule 13e-4 of the General Rules and Regulations
under the Exchange Act, the Company has filed with the Commission a Tender Offer
Statement on Schedule TO which contains additional information with respect to
the Offer. Such Schedule TO, including the exhibits and any amendments thereto,
may be examined, and copies may be obtained, as is set forth below.
Federal securities law requires the Company to file information with the
Commission concerning its business and operations. Accordingly, the Company
files annual, quarterly and special reports, proxy statements and other
information with the Commission. Such reports, as well as other information
concerning the Company that is filed with the Commission, may be inspected and
copies may be obtained at the Commission's Public Reference Section at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should also be available for inspection and copying at the regional offices of
the Commission located at 7 World Trade Center, 13th Floor, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may be obtained by mail, upon payment of
the Commission's customary fees, from the Commission's Public Reference Section
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission maintains a Web site that contains reports, proxy and information
statements and other materials that are filed through the Commission's
Electronic Data Gathering, Analysis, and Retrieval system. This Web site can be
accessed at http://www.sec.gov. The Company's Schedule TO may not be available
at the Commission's regional offices.
14. MISCELLANEOUS.
The Company is not aware of any jurisdiction where the making of the Offer
is not in compliance with applicable law. If the Company becomes aware of any
jurisdiction where the making of the Offer is not in compliance with any valid
applicable law, the Company will make a good faith effort to comply with such
law. If, after such good faith effort, the Company cannot comply with such law,
the Offer will not be made to (nor will tenders be accepted from or on behalf
of) the holders of Shares residing in such jurisdiction. In any jurisdiction the
securities or blue sky laws of which require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on the Company's behalf
by one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
30
<PAGE> 40
No person has been authorized to give any information or make any
representation on behalf of the Company in connection with the Offer other than
those contained in this Offer to Purchase or in the related Letter of
Transmittal. If given or made, such information or representation must not be
relied upon as having been authorized by the Company.
R&B FALCON CORPORATION
October 27, 2000
31
<PAGE> 41
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
The following is a list of the directors and executive officers of R&B
Falcon Corporation (the "Company") and for each, a description of the following:
(i) current principal occupation or employment and the name, principal business
address of any corporation in which the employment or occupation is conducted;
(ii) material occupations, positions, offices or employment during the past five
years, giving the starting and ending dates of each and the name, principal
business and address of any corporation or other organization in which the
occupation, position, office or employment was carried on; and (iii) country of
citizenship.
Unless otherwise noted below, none of the following persons has been
convicted in a criminal proceeding during the past five years (excluding traffic
violations or similar misdemeanors), and none of the following persons has
during the past five years been a party to any judicial or administrative
proceeding (except for matters that were dismissed without sanction or
settlement) that resulted in a judgment, decree or final order enjoining the
person from future violations of, or prohibiting activities subject to, federal
or state securities laws, or a finding of any violation of federal or state
securities laws.
Unless otherwise noted below, the business address of each of the following
persons is 901 Threadneedle, Houston, Texas 77079.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Paul B. Loyd, Jr. .................... 54 Chairman of the Board, Chief Executive
Officer and Director
Andrew Bakonyi........................ 46 President and Chief Operating Officer
Tim W. Nagle.......................... 50 Executive Vice President and Chief
Financial Officer
Wayne K. Hillin....................... 58 Senior Vice President and General
Counsel
Charles R. Ofner...................... 54 Senior Vice President
Bernie W. Stewart..................... 56 Senior Vice President, Operations --
Shallow Water and Transition Zone
Division
Imran Toufeeq......................... 44 Senior Vice President, Operations --
International and Deepwater Division
Charles A. Donabedian................. 57 Director
Steven A. Webster..................... 49 Director
Douglas A.P. Hamilton................. 54 Director
Michael E. Porter..................... 53 Director
Robert L. Sandmeyer................... 71 Director
Douglas E. Swanson.................... 62 Director
Arnold L. Chavkin..................... 49 Director
Macko A.E. Laqueur.................... 55 Director
Richard A. Pattarozzi................. 57 Director
William R. Ziegler.................... 58 Director
</TABLE>
---------------
Paul B. Loyd, Jr. has been a director since the Company's organization in
July 1997, has been Chairman of the Board since January 6, 1998 and has been
Chief Executive Officer since May 19, 1999. From 1991 until the merger between
Reading & Bates Corporation ("Reading & Bates") and Falcon Drilling Company,
Inc. ("Falcon Drilling"), Mr. Loyd was Chief Executive Officer and Chairman of
the Board of Reading & Bates. Mr. Loyd has been President of Loyd & Associates,
Inc., a financial consulting firm, since 1989. Mr. Loyd is a director of
Frontier Oil Corporation (formerly Wainoco Oil Corporation) and Carrizo Oil &
Gas, Inc. Mr. Loyd is a citizen of the United States.
<PAGE> 42
Andrew Bakonyi has been President of the Company since May 19, 1999. He
previously served as President of Reading & Bates since January 1998. From
December 1996 to December 1997, he was President of Reading & Bates Drilling Co.
For more than five years prior to that, Mr. Bakonyi was a Vice President of
Reading & Bates Drilling Co. Mr. Bakonyi is a citizen of Australia.
Tim W. Nagle has been Executive Vice President of the Company since January
1998, and on May 19, 1999 he was also made Chief Financial Officer. Mr. Nagle
served as Chief Financial Officer of Reading & Bates for more than five years
prior to 1998. Mr. Nagle is a citizen of the United States.
Wayne K. Hillin has been Senior Vice President of the Company since January
1998 and on May 19, 1999 was also made General Counsel. Mr. Hillin was Senior
Vice President and General Counsel of Reading & Bates for more than five years
prior to 1998. Mr. Hillin is a citizen of the United States.
Charles R. Ofner has been Vice President of the Company since January 1998.
Mr. Ofner was Vice President -- Business Development of Reading & Bates for more
than five years prior to that. Mr. Ofner is a citizen of the United States.
Bernie W. Stewart has been Senior Vice President, Operations of the Company
since May 19, 1999. He previously served as Chief Operating Officer of Falcon
since April 1, 1996 and President of Falcon since January 1998. From 1993 until
joining Falcon, Mr. Stewart was Chief Operating Officer for Hornbeck Offshore
Services, Inc., an offshore supply boat operator, where he was responsible for
overall supervision of that company's operations. From 1986 until 1993, he was
President of Western Oceanics, Inc., an offshore drilling contractor. Mr.
Stewart is a citizen of the United States.
Imran Toufeeq has been Senior Vice President, Operations of the Company
since May 19, 1999. He previously served as Senior Vice President of Reading &
Bates since January 1998 and was Vice President of R&B Falcon Drilling Co. for
more than five years prior to 1998. Mr. Toufeeq is a citizen of the United
States.
Charles A. Donabedian has been a director of the Company since December
1997 and was a director of Reading & Bates from 1989 until the merger between
Reading & Bates and Falcon Drilling. Since May 1992, Mr. Donabedian has been
Chairman and Chief Executive Officer of both Winston Financial Incorporated
which provides product development, marketing and sales consulting and services
to the financial services industry and Winston Advisors, Inc. (of which Mr.
Donabedian is also a director) which provides financial advice for individuals
and small companies. Mr. Donabedian's business address is 200 Technecenter
Drive, Suite 200, Milford, Ohio 45150. Mr. Donabedian is a citizen of the United
States.
Steven A. Webster has been a director of the Company since July 1997. He
previously served as President and Chief Executive Officer from January 6, 1998
until May 31, 1999. Mr. Webster has served as Chief Executive Officer and
Chairman of the Board of Falcon since its formation in 1991. Mr. Webster is
currently a Managing Director of DLJ Merchant Banking Partners, and serves as a
director of Grey Wolf, Inc.; Carrizo Oil & Gas, Inc.; Ponder Industries, Inc.;
Geokinetics, Inc.; and Crown Resources Corporation. Mr. Webster also serves as a
trust manager of Camden Property Trust. Mr. Webster's business address is 14701
St. Mary's Lane, Suite 800, Houston, Texas 77079. Mr. Webster is a citizen of
the United States.
Douglas A.P. Hamilton has been a director of the Company since December
1997. Mr. Hamilton was a director of Falcon from 1992 until the merger between
Reading & Bates and Falcon Drilling. For more than the past five years, he has
been a private investor. Mr. Hamilton was one of Falcon's original investors.
Mr. Hamilton is a director of Carrizo Oil & Gas, Inc. Mr. Hamilton's business
address is 485 Madison Avenue, 23rd Floor, New York, New York 10022. Mr.
Hamilton is a citizen of the United States.
Michael E. Porter has been a director of the Company since December 1997.
Dr. Porter was a director of Falcon from January 1, 1997 until the merger
between Reading & Bates and Falcon Drilling. Dr. Porter is the C. Roland
Christensen Professor of Business Administration at the
<PAGE> 43
Harvard Business School, a position he has held since 1973. Dr. Porter is a
director of Parametric Technology Corporation and ThermoQuest Corporation. Dr.
Porter's business address is Harvard Business School, Soldiers Field Road,
Boston, Massachusetts 02445. Dr. Porter is a citizen of the United States.
Robert L. Sandmeyer has been a director of the Company since December 1997.
Dr. Sandmeyer was a director of Reading & Bates from 1988 until the merger
between Reading & Bates and Falcon Drilling. Dr. Sandmeyer has been Dean
Emeritus of the College of Business Administration at Oklahoma State University
since 1994, and for more than five years prior to that, was Dean and Professor
of Economics at such institution. Dr. Sandmeyer is the principal of SC2
International, which specializes in assisting foreign business schools in their
efforts to meet international standards. Mr. Sandmeyer's business address is
1906 Iba Drive, Stillwater, Oklahoma 74074. Mr. Sandmeyer is a citizen of the
United States.
Douglas E. Swanson has been a director of the Company since December 2,
1998 in accordance with the merger between Reading & Bates and Falcon Drilling
agreement pursuant to which we acquired all of the outstanding stock of Cliffs
Drilling Company. He also served as President of Cliffs Drilling Company from
December 1, 1998 until July 31, 1999. Mr. Swanson joined Cliffs Drilling Company
in 1978 as Executive Vice President and served in that office until his election
as President, effective January 1, 1992. Mr. Swanson currently serves as a
director of Tuboscope, Inc. Mr. Swanson is a citizen of the United States.
Arnold L. Chavkin has been a director of the Company since December 1997
and was a director of Reading & Bates from August 1991 until the merger between
Reading & Bates and Falcon Drilling. Mr. Chavkin has been general partner of
Chase Capital Partners, a general partnership which invests in leveraged
buyouts, recapitalizations, growth equities and venture situations, since
January 1992, and President of Chemical Investments, Inc., an affiliate of Chase
Capital Partners, since March 1991. Chase Capital Partners and Chemical
Investments, Inc. are affiliates of Chase Manhattan Corporation. Chemical
Investments, Inc. is a stockholder of the Company. Mr. Chavkin is a director of
American Radio Systems, Bell Sports Corporation, Carrizo Oil & Gas, Inc. and
Wireless One, Inc. Mr. Chavkin's business address is 1221 Avenue of the
Americas, 39th Floor, New York, New York 10020-1080. Mr. Chavkin is a citizen of
the United States.
Macko A.E. Laqueur has been a director of the Company since December 1997
and was a director of Reading & Bates from April 1995 until the merger between
Reading & Bates and Falcon Drilling. Since 1980, Mr. Laqueur has been a senior
partner and one of the two founders of Venture Capital Investors, a private
investment company located in Amsterdam, The Netherlands. Mr. Laqueur holds
board positions with Thermae Holding, a large resort owner and operator, and
with Sanadome Holding N.V., a medical spa facility. Mr. Laqueur and Venture
Capital Investors have interests in a large number of companies involved in the
offshore industry owning service, supply and heavy lift vessels. Mr. Laqueur is
one of the controlling persons of Workships Intermediaries, N.V., a stockholder
of the Company. Mr. Laqueur's business address is Herengracht 468, 1017 CA
Amsterdam, The Netherlands. Mr. Laqueur is a citizen of The Netherlands.
Richard A. Pattarozzi has been a director of the Company since February
2000. From January 1, 1995 until December 31, 1999 Mr. Pattarozzi was employed
by Shell Oil Company. He also served as President and Chief Executive Officer of
Shell Deepwater Development Inc. and Shell Deepwater Production Inc. Mr.
Pattarozzi is a director of Stone Energy Company. Mr. Pattarozzi's business
address is 333 Brockenbraugh Ct., Metairie, Louisiana 70005. Mr. Pattarozzi is a
citizen of the United States.
William R. Ziegler has been a director of the Company since December 1997
and was a director of Falcon from 1991 until the merger between Reading & Bates
and Falcon Drilling. Mr. Ziegler is a partner of the law firm of Satterlee
Stephens Burke & Burke LLP following its business combination with Parsons &
Brown LLP in July 1999 where Mr. Ziegler was previously a partner. Satterlee
Stephens Burke & Burke LLP acts as counsel to the Company. Prior to joining
Parson & Brown, LLP, in May 1994, Mr. Ziegler was a partner in the law firm of
Whitman Breed Abbott & Morgan and a predecessor firm for more than the preceding
five years, which
<PAGE> 44
firms acted as counsel to the Company. Mr. Ziegler is a director of Grey Wolf,
Inc.; Geokinetics, Inc.; Ponder Industries, Inc.; and Flotek Industries, Inc.
Mr. Ziegler's business address is 230 Park Avenue, 11th Floor, New York, New
York 10169. Mr. Ziegler is a citizen of the United States.
<PAGE> 45
EXHIBIT A
FAIRNESS OPINION
MORGAN STANLEY DEAN WITTER
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000
October 17, 2000
Board of Directors
R&B Falcon Corporation
901 Threadneedle, Suite 200
Houston, Texas 77079-2902
Members of the Board:
We understand that R&B Falcon Corporation ("R&B Falcon" or the "Company")
will commence a tender offer (the "Offer") to purchase, on the terms set forth
in the form of the draft Offer to Purchase dated October 12, 2000 (the "Offer to
Purchase"), all outstanding shares of 13.875% Senior Cumulative Redeemable
Preferred Stock, liquidation preference $1,000 per share (the "Preferred
Stock"), issued by the Company April 22, 1999. Pursuant to the Offer to
Purchase, the Offer will be at a price of $1,300 per share of Preferred Stock,
net to the seller in cash (the "Offer Price"). We also note that the Offer is
being made in connection with, but is not contingent upon, the merger (the
"Merger") of R&B Falcon with an indirect subsidiary of Transocean Sedco Forex
Inc. ("Transocean") pursuant to the Agreement and Plan of Merger dated August
19, 2000 (the "Merger Agreement"). Pursuant to the Merger R&B Falcon will, among
other things, become a subsidiary of Transocean. The terms and conditions of the
Merger and the Offer are more fully set forth in the Merger Agreement and the
Offer to Purchase, respectively.
You have asked for our opinion as to whether the Offer Price to be received
by the holders of shares of Preferred Stock pursuant to the Offer is fair from a
financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and
other information of R&B Falcon and Transocean, respectively;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning R&B Falcon and
Transocean prepared by the managements of R&B Falcon and
Transocean, respectively;
(iii) reviewed certain financial forecasts prepared by the
managements of R&B Falcon and Transocean, respectively;
(iv) discussed the past and current operations and financial
condition and the prospects of R&B Falcon and Transocean,
including information relating to certain strategic, financial
and operational benefits anticipated from the Merger, with
senior executives of R&B Falcon and Transocean, respectively;
(v) reviewed the pro forma impact of the Offer and its financing on
R&B Falcon's earnings per share, cash flow, consolidated
capitalization and financial ratios;
(vi) reviewed the trading activity and prices for the Preferred
Stock;
<PAGE> 46
MORGAN STANLEY DEAN WITTER
(vii) compared the financial performance and credit ratings of R&B
Falcon and Transocean and the prices and trading activity of
the Preferred Stock with those of certain other publicly-traded
companies, comparable with R&B Falcon and Transocean,
respectively, and their securities;
(viii) discussed the strategic and financial considerations for the
Offer with the management and Board of Directors of R&B Falcon;
(ix) participated in discussions and negotiations among
representatives of R&B Falcon and Transocean and their
financial and legal advisors;
(x) reviewed the Merger Agreement and certain related documents;
(xi) reviewed the Certificate of Designation relating to the
Preferred Stock and the draft Offer to Purchase;
(xii) reviewed the past, current and anticipated financial returns of
the Preferred Stock;
(xiii) reviewed the financial terms, to the extent publicly available,
of certain comparable tender offers to purchase securities
deemed relevant; and
(xiv) performed such other analyses and considered such other factors
as we have deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial forecasts, including information
relating to certain strategic, financial and operational benefits anticipated
from the Merger, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
future financial performance of R&B Falcon and Transocean, respectively. We have
not made any independent valuation or appraisal of the assets or liabilities of
R&B Falcon or Transocean; nor have we been furnished with any such appraisals.
In addition, we have assumed that the Merger and the Offer, if consummated, will
be consummated in accordance with the terms set forth in the Merger Agreement
and the draft Offer to Purchase, including that the Merger will be treated as a
tax-free reorganization pursuant to the Internal Revenue Code of 1986, as
amended. Our opinion is necessarily based on financial, economic, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and in connection with the Merger, including
providing a fairness opinion to the Board of Directors of the Company in
connection with the Merger, and will receive a fee for our services for each
transaction. In the past, Morgan Stanley & Co. Incorporated and its affiliates
have provided financial advisory services for the Company and have received fees
for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing of a proxy or registration statement made by R&B Falcon with the
Securities and Exchange Commission in connection with the Offer.
We are expressing no opinion herein as to the prices at which the Preferred
Stock will trade at any time. This opinion does not address the fairness of the
Merger or the relative fairness of the consideration to be received by holders
of Preferred Stock or R&B Falcon common stock in the Offer and the Merger,
respectively. In addition, Morgan Stanley expresses no opinion or recommendation
as to how the holders of Preferred Stock should act with regard to the Offer or
as to how the holders of R&B Falcon Common Stock should vote at the
stockholders' meeting held in connection with the Merger.
<PAGE> 47
MORGAN STANLEY DEAN WITTER
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the Offer Price to be received by the holders of shares of Preferred
Stock pursuant to the Offer is fair from a financial point of view to such
holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
<PAGE> 48
In order to tender, a holder of the Shares (a "Holder") must send or
deliver a properly completed and signed Letter of Transmittal, certificates for
Shares and any other required documents to the Depositary at its address set
forth below or tender pursuant to DTC's Automated Tender Offer Program.
THE DEPOSITARY FOR THE TENDER OFFERS IS:
American Stock Transfer & Trust Company
59 Maiden Lane
New York, New York 10038
Attention: Reorganization Department
BY FACSIMILE FOR ELIGIBLE INSTITUTIONS
(718) 234-5001
To Confirm by Telephone:
(718) 921-8200
Any questions or requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or related documents may be
directed to the Information Agent at its telephone number set forth below. A
Holder may also contact a Dealer Manager at its telephone number set forth below
or such Holder's broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE TENDER OFFER IS:
[Georgeson Shareholder Communications Inc. Logo]
17 State Street, 10th Floor
New York, New York 10004
Call Collect (212) 440-9800
Call Toll Free (800) 223-2064
THE JOINT DEALER MANAGERS FOR THE TENDER OFFER ARE:
<TABLE>
<S> <C>
Goldman, Sachs & Co. Morgan Stanley & Co. Incorporated
Liability Management Group Liability Management Group
85 Broad Street 1585 Broadway, Second Floor
New York, New York 10004 New York, New York 10036
Call Toll Free (800) 828-3182 Call Toll Free (800) 624-1808
</TABLE>
